World Bank pares India FY23 growth projection to 6.5%
World Bank pares India FY23 growth projection to 6.5%
he World Bank has trimmed its estimate for India’s growth in the current fiscal year (FY2223) to 6.5%, one percentage point lower than its previous projection in June and compared with the last fiscal year’s 8.7% pace.
- The estimate for the current year was revised due to ‘persistent pressures’.
- The Indian economy is expected to speed up to 7% in the next fiscal year, before settling back down to 6.1% in FY2425.
- With Sri Lanka’s economic crisis, the devastating floods in Pakistan, and recovery from the pandemic impacted by the war in Ukraine, recovery in the region will be uneven.
- The slowing in India’s growth during the current fiscal year, relative to the previous one, was because most of the COVID recovery happened last year, the report said.
- The impact of the RussiaUkraine war, global monetary tightening, high commodity prices and interest rates impacting domestic demand, contributing to this slowing
- The economies that are more servicesled are expected to maintain a reasonable recovery trend despite headwinds.
Service Sector in India
- The service sector is the largest and fastest-growing sector in India and has the highest labour productivity.
- India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
- India has a significant presence in the services sector exports. It remained among the top ten trading countries in commercial services in 2019 accounting for 3.5 per cent of world services exports.
- Share of the services sector accounted for 54% of the total GVA in FY21.
Image Courtesy: indiabudget.gov
- Potential (Sub Sector-wise Details )
- Tourism Sector:
- The tourism sector is a major engine of economic growth that contributes significantly in terms of GDP, foreign exchange earnings and employment.
- The tourism sector in India had been performing well with Foreign Tourist Arrivals (FTAs) growing at 14 per cent to 10.04 million and Foreign Exchange Earnings (FEEs) at 19.1 per cent to US$ 27.31 billion in 2017.
- India ranked 23rd in the world in terms of international tourist arrivals in 2019, falling slightly from the 22nd position in 2018.
- The country accounts for 1.23 per cent of the world’s international tourist arrivals and 4.97 per cent of Asia & Pacific’s international tourist arrivals.
- India ranks 12th in the world and 7th in Asia & Pacific in terms of tourism foreign exchange earnings, accounting for over 2 per cent of the world’s tourism foreign exchange earnings.
- Ports, Shipping and Waterways Services:
- Ports handle around 90 per cent of export-import cargo by volume and 70 per cent by value in India.
- Tourism Sector:
- The consistent growth of around 6 per cent was maintained in overall port traffic between 2015-16 and 2018-19.
- Space:
- India’s space programme has grown exponentially in the past six decades, expanding from simple mapping services in the 1960s to many diversified uses including- design and development of a series of launch vehicles and related technologies, satellites and related technologies for earth observation, telecommunication & broadband, navigation, meteorology and space science, R&D in space sciences, & most recently, planetary exploration.
- India spent about US$ 1.8 billion on space programmes in 2019-20 and in June 2020, GOI opened up the Space sector enabling the participation of the Indian private sector in the entire gamut of space activities.
- Logistics & Transportation
- India’s natural coastline and vast river network give it a competitive edge in providing transportation and logistics services, both domestically and internationally.
- IT-BPM/ Fintech:
- The Indian IT-BPM industry has been the flag-bearer of India’s exports over the last 20 years.
- Over the last decade, the industry grew by 102 per cent reaching US$ 190.5 billion in revenues in 2019-20.
- Software & Engineering Services has witnessed a consistent growth each year, constituting a share of 21 per cent in the sector and US$ 40.2 billion in revenue in 2019-20.
- Other services:
- Media & Entertainment (animation, gaming, dubbing), Education (online platforms such as MOOC), and Sports (IPL, IFL, Sports Management), Legal/ Paralegal services, Risk management and advisory functions, etc. are areas that can lead to an immense contribution of service industry in the Indian economy.
- FDI in Service Sector:
- India improved its position from 12th in 2018 to 9th in 2019 in the list of the world’s largest FDI recipients according to the latest World Investment Report 2020 by United Nations Conference on Trade and Development (UNCTAD).
- FDI into India recorded an almost 17 per cent jump during April-September 2020 over the corresponding period last year, despite the global slowdown, the COVID-19 pandemic, lockdown measures and supply chain disruptions.
Challenges
- Impact of the pandemic:
- India’s Services sector witnessed a significant setback during the COVID-19 pandemic mandated lockdown particularly sub-sectors such as tourism, aviation, and hospitality.
- During the first half of the financial year 2020-21, the services sector contracted by almost 16 per cent.
- This decline was led by a sharp contraction in all sub-sectors particularly ‘Trade, hotels, transport, communication & services related to broadcasting.
- Impact of Demonetization: Demonetization, temporarily impacted the services sector as in the case of other sectors.
- Employment in Services: Employment has not kept pace with the share of the sector in gross domestic product and has not produced the number or quality of jobs needed.
- Lack of Policy: There is no policy leading to inclusive growth, and multiple, uncoordinated governing bodies adversely affect the growth of the sector.
- Many regulations are outdated, and there are restrictions and barriers to foreign direct investment.
- Domestic Regulations and Services Trade Restrictiveness
- Market Access Barriers: There are many market access barriers in India’s trading partner countries.
- Some of them for major services include Visa issues in different countries for Professionals; licensing of professional service suppliers.
Government Initiatives
- Structural reforms: The year 2020-21 witnessed many significant structural reforms.
- The space sector was opened up, telecom related regulations were removed from the IT-BPO sector, and consumer protection regulations were introduced for e-commerce.
- Health Sector: In October 2021, the Prime Minister of India approved the establishment of 157 new medical colleges to boost the accessibility of affordable health treatments among citizens.
- The Government of India has set up 1,50,000 Ayushman health and wellness centres to provide affordable treatment of diseases like cancer, diabetes etc and check-up at the primary level.
- In October 2021, the PM Ayushman Bharat Health Infrastructure Mission was launched by the government, to strengthen the critical healthcare network across India in the next four to five years.
- It aims to tackle this deficiency. The aim is to strengthen the critical healthcare network from village to block to the district to the regional and national level in the next 4-5 years.
- Production Linked Incentive (PLI) scheme: In October 2021, the government launched a production linked incentive (PLI) scheme to boost the manufacturing of telecom and networking products in India.
- It will help in reducing India’s dependence on other countries for the import of telecom and networking products.
- Mahatma Gandhi National Fellowship: Union Minister for Education and Skill Development & Entrepreneurship launched phase II of the Mahatma Gandhi National Fellowship, a two-year-long fellowship conceived to create opportunities for young, dynamic individuals to contribute to enhancing skill development at the grassroots.
- PMKVY 3.0: The Ministry of Skill Development and Entrepreneurship (MSDE) launched the third phase of its flagship scheme PMKVY 3.0 in January 2021.
- PMKVY 3.0 will be implemented in a more decentralised structure with greater responsibilities and support from States/UTs and Districts by incorporating the learnings from PMKVY 1.0 and PMKVY 2.0.
- National Broadband Mission: The government of India has launched the National Broadband Mission with an aim to provide Broadband access to all villages by 2022.
- BharatNet project. : The Department of Telecommunications (DoT) has started pre-bid meetings with various stakeholders to implement the public-private partnership model (PPP) for the BharatNet project.
- Real Estate: Some of the recent policy measures taken by the Government include Pradhan Mantri Awas Yojana (PMAY- Urban), Smart Cities Mission, Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs), relaxation of conditions to claim tax incentive for affordable housing projects, and the Benami Transactions (Prohibition) Amendment Act, 2016 and introducing Real Estate (Regulation & Development) Act, 2016 (RERA)
- International Collaboration: In September 2021, India and the UK joined the 11th Economic and Financial Dialogue (EFD) to discuss the FTA (Free Trade Agreement) opportunities in services.
- India and Australia agreed to broad-base cooperation in the spheres of the digital economy and cyber-enabled critical technologies, noting the need to strengthen the security of critical information infrastructure such as 5G telecom networks.
- In April 2021, Elon Musk’s SpaceX has started accepting pre-orders for the beta version of its Starlink satellite internet service in India for a fully refundable deposit of US$ 99.
- Currently, the Department of Telecommunications (DoT) is screening the move and more developments will be unveiled soon.
Way Forward
- India should closely look into the development of the service industry, given the potential and need for sustained large scale investment. Investments typically have a long gestation period.
- However, once the infrastructure is created, linkages to the rest of the economy provide significant multiplier effects.
- Reforms in Domestic regulations are important both for domestic production and export of services.
- However domestic regulations should not act or be used as restrictive trade barriers.
- The market access restrictions need to be negotiated in the WTO and bilateral meetings.
- There is a need for further efforts to enhance both unskilled/semiskilled employment and skilled and quality employment in the services sector.
- The Skill India initiative could be further dovetailed for services sector employment
Annie Ernaux wins Literature Nobel
The Nobel Prize for Literature 2022 has gone to French author Annie Ernaux, for, according to the Swedish Academy, “the courage and clinical acuity with which she uncovers the roots, estrangements and collective restraints of personal memory”.
More about her work
- Ernaux, 82, has seen a sharp increase in popularity in the English-speaking world since 2019, after her seminal work ‘The Years’, translated by Alison L Strayer, was shortlisted for the Man Booker international prize.
- Her book on her illegal abortion in the 1960s, ‘Happening’ (first published in 2001) has also been in the limelight after abortion rights were curtailed in the US.
- Ernaux, née Duchesne, was born in Lillebonne Normandy in 1940. Her parents moved to Yvetot a few years later, where they ran a grocery and cafe.
- Her ‘A Girl’s Story’ (published in French in 2016), built on her own experiences at a children’s camp, deals with the shaming an 18-year-old girl is subjected to for her sexuality.
Flashback
- Last year’s Nobel literature prize went to the Tanzanian-born, UK-based writer Abdulrazak Gurnah, whose novels explore the impact of migration on individuals and societies.
- The prizes to Gurnah in 2021 and US poet Louise Glück in 2020 helped the literature prize move on from years of controversy and scandal.
- In 2018, the award was postponed after sex abuse allegations rocked the Swedish Academy, which names the Nobel literature committee, and sparked an exodus of members.
- The academy revamped itself but faced more criticism for giving the 2019 literature award to Austria’s Peter Handke, who has been called an apologist for Serbian war crimes.
India abstains on Sri Lanka vote at UN Human Rights Council
India on Thursday abstained from voting on a resolution on Sri Lanka at the UN Human Rights Council, while observing that Sri Lanka’s progress in implementing commitments on the 13th Amendment, meaningful devolution and early provincial elections remains “inadequate”.
- Achieving prosperity for all Sri Lankans and realizing the legitimate aspirations of Tamils of Sri Lanka for prosperity, dignity and peace are two sides of the same coin,” India’s Permanent Representative to the UN Ambassador Indra Mani Pande said.
- India has “substantially contributed” to the relief, rehabilitation, resettlement and reconstruction process in Sri Lanka after 2009 and more recently provided “unprecedented assistance” to the people of Sri Lanka to face the challenges of the recent economic crisis
- The resolution titled ‘Promoting reconciliation, accountability and human rights in Sri Lanka’ was adopted by the Council after 20 of its 47 members voted in its favor. While 20 countries abstained, seven — including China and Pakistan — voted against it.
- The resolution called upon the Government of Sri Lanka to ensure the prompt, thorough and impartial investigation and, if warranted, prosecution of all alleged crimes relating to human rights violations and serious violations of international humanitarian law, including for long standing emblematic cases, with the full participation of victims and their representatives.
Major challenges in India SriLanka relationship
- China factor in India-Sri Lanka relation: In terms of being the platform for India-China strategic competition, Sri Lanka has endorsed China’s flagship connectivity project, the Belt and Road Initiative (BRI). It is also, one of the important nodes for China’s maritime strategy.
- Lack of bipartition support to India-Sri Lanka ties soured precipitously when Mahindra Rajapaksha leased the strategically significant port of Hambantota to China, an issue highly sensitive toIndia.
- Ethnic issue: It is the prolonged conflict between the Sinhala majority and Tamil minority in Sri Lanka that has severely undermined bilateral ties in recent decades. The issue also involves war-crimes probe and accountability issues in SriLanka.
- Fishing Disputes: Given the proximity of the territorial waters of both countries, especially in the Palk Straits and the Gulf of Mannar, incidents of straying of fishermen are common.
World Bank report on Poverty
According to a new World Bank report, “Poverty and Shared Prosperity 2022: Correcting Course”, the Covid pandemic has been the biggest setback to global poverty alleviation in decades. The world is unlikely to meet the goal of ending extreme poverty by 2030 absent history-defying rates of economic growth over the remainder of this decade.
What has the report said?
- Global poverty reduction has been slowing down since 2015, but the Covid pandemic and the war in Ukraine have completely reversed the outcomes.Due to it, the global goal of ending extreme poverty by 2030 would not be achieved.
- In 2020 alone, the number of people living below the extreme poverty line rose by over 70 million; the largest one-year increase since global poverty monitoring began in 1990. As a result, an estimated 719 million people subsisted on less than $2.15 a day by the end of 2020.
- Global inequality rose, for the first time in decades. The poorest people bore the steepest costs of the pandemic: income losses averaged 4 per cent for the poorest 40 per cent, double the losses of the wealthiest 20 percent of the income distribution.
What about India’s poverty levels?
- Poverty has gone up in India too.“Previous estimates suggested a poverty headcount rate at the US$1.90 poverty line of 10.4 per cent in 2017.
- The latest estimate based on Sinha Roy and van der Weide (2022) shows that poverty at the US$1.90 poverty line was 13.6 per cent in 2017”.
What are the suggested solutions?
- According to David Malpass, President World Bank Group, “fiscal policy prudently used and considering the initial country conditions in terms of fiscal space does offer opportunities for policy makers in developing economies to step up the fight against poverty and inequality”.
- The average poverty rate in developing economies would have been 2.4 percentage points higher without a fiscal response.
The World Bank has three specific suggestions when it comes to fiscal policy:
- Choose targeted cash transfers instead of broad subsidies.
- Prioritize public spending for long-term growth.
- Mobilize tax revenues without hurting the poor.
Contaminated medicines
Following the death of 66 children in Gambia, the World Health Organization (WHO) has raised an alert over four medicines of fever, cold and cough syrups produced by Haryana-based Maiden Pharmaceuticals Limited and has urged people to not use them.
- India’s apex drug regulatory authority – the Central Drugs Standard Control Organisation (CDSCO) – has already launched an investigation into the matter.
About:
- Names of medicines: The four syrups are — Promethazine Oral Solution, Kofexmalin Baby Cough Syrup, Mak off Baby Cough Syrup and Magrip N Cold Syrup.
- Names of contaminants: Unacceptable amounts of diethylene glycol and ethylene glycol are found as contaminants.
Effect of contaminants:
- Diethylene glycol and ethylene glycol can cause toxic effects, including abdominal pain, vomiting, diarrhoea, inability to pass urine, headache, altered mental state, and acute kidney injury that may lead to death
- These medicinal products are substandard and unsafe for use, especially in children, and may result in serious injury or death, as per WHO.
Measures to be taken:
- Individuals are advised to seek immediate medical advice from a qualified healthcare professional and report the incident to the National Regulatory Authority or National Pharmacovigilance Centre.
- Countries should increase surveillance of the supply chains to detect and remove the substandard products including surveillance of informal or unregulated markets.
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