News Wrap

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The annual economic Survey 2017-18 expects that India would grow at 6.75% in 2017-18, and will rise 7 to 7.5%, in 2018-19, which will be the next Lok Sabha election year. There was a caution on rising oil prices, and short correction in elevated stock prices, as factors that could feed inflation and keep interest rates elevated. There is a call for supporting agriculture, privatise Air India, and finish bank recapitulation with the effort to recapitalise banks, called the solving of twin balance sheet problem, economic growth will be helped. Volume-1 of the Economic Survey contains the analytical overview and more Research-cum-Analytical material. Volume-2 provides the more descriptive review of the current fiscal. Retail inflation averaged 3.3% in 2017-18, lowest in last 6 fiscals. Urban migration led to feminisation of the farm sector. Goods and Services Tax (GST) data shows 50% rise in number of indirect taxpayers. Demonetisation has encouraged financial savings. Persistently high oil prices remained a key risk for a country that relies on imports for much of its fuel needs. Surging oil prices have risen 14% in the past year. There are fears that the stock market bubble could go bust. Crude oil is now trading at $70 a barrel, and forecast to rise. Shale oil was expected to come back at about $50-55, but so far it has not come back. Parents are choosing to keep having children, until they get the desired number of sons. For employment the focus is on creating an educated and healthy labour force, by giving them proper training. Agriculture efforts would be made to raise farm productivity, and strengthen agricultural resilience. Climate change was playing havoc with farm incomes, and could aggravate the situation in the years ahead. India needs to spread irrigation, against a backdrop of rising water scarcity, and depleting ground-water resources. Agricultural research will be vital in improving yields, as also to adaptability to climate change. Farm distress has already given rise to farmer movements throughout the country, forcing states such as Maharashtra, Punjab and Uttar Pradesh, to announce a waiver of agricultural loans. The cumulative debt relief announced by the three states, amounts to around Rs 77,000 crore.

Union Budget
The Government of India union budget for 2018-19, has a fiscal deficit target of 3.3% of GDP. The fiscal deficit target for 2017-18 was earlier 3.2% of GDP, which has a revised estimate of 3.5% of GDP. A revamped National Health Protection Scheme will provide coverage of up to Rs 5 lac per family per year for secondary and tertiary care hospitalisation for 10 crore families. There is a promise to provide Minimum Support Price (MSP) for all unannounced crops of Kharif, at least one and half times of their production cost. The farm livelihood package has a cumulative allocation of Rs 14.34 crore. The populist budget woos rural voters, focusing on agriculture and the health sector. The Long Term Capital Gains (LTCG) tax is reintroduced on gains of more than Rs 1 lac in the equity market, at a rate of 10%. At present, gains from equity investments held for more than 12 months, were exempt from tax. A tax on distributed income by equity oriented mutual funds is introduced at the rate of 10%. The Corporate Tax rate is cut from 30% (2017-18) to 25% (2018-19), to companies recording a turnover of up to Rs 250 crore from Rs 50 crore. There are no changes to income tax slab structure for individuals, except a provision to allow standard deduction of Rs 40,000 for salaried taxpayers, in lieu of existing medical and transport bills. Relief for senior citizens and pensioners is provided as the interest income exemption is increased to Rs 50,000 from Rs 10,000 for all fixed and recurring deposit schemes, including small savings. The Pradhan Mantri Vaya Vandana Yojana has been extended up to March 2020, under which an assured return of 8% is given by Life Insurance Corporation of India. The existing limit of investment of Rs 7.5 lakh per senior citizen under the scheme, is being doubled to Rs 15 lac. The education cess is increased to 4% from the present 3%. Hike on customs duties will make cellphones, cars, motorcyles, fruit juices, perfumes and footwear costlier.

The railways receive a capital expenditure allocation of Rs 1.48 crore, with a 13% increase over 2017-18. The focus is on strengthening the railway network and enhancing its carrying capacity. A ‘Safety First’ policy has adequate funds allotted under Rastriya Rail Sanrakha Kosh, and a bonanza for suburban commuters in Mumbai and Bengaluru. Maintenance of track infrastructure is being given special attention and over 3600 kms of track renewal is targeted.

The budget allocation for defence is 1.58% of GDP, the lowest since 1962. This is Rs 2.95 crore, earlier Rs 2.74 crore (2017-18), much of the capital allocation is absorbed by payments for agreed contracts on imports of fighters, transport aircraft and helicopters.

West Bengal Budget
The West Bengal state budget for 2018-19 is about Rs 214,958.75 crore, which has a focus on the rural populace, particularly farmers, low and middle income groups and women. No new taxes nor increase in existing tax rates are proposed. Bengal’s own tax revenue was about Rs 50,000 crore in 2017-18, but it has liabilities of Rs 52,000 crore to service outstanding debt and another Rs 50,000 crore on salaries, pensions and subsidies. The state economy faces nearly Rs 3 lac crore debt burden. For 2017-18, the state’s own tax revenue stood at Rs 50,070 crore, much lower than the budget estimates of Rs 55,786 crore. In urban areas the stamp duty will be reduced from 7% to 6%, while in rural areas it will be reduced from 6% to 5%. A Rs 100 crore special fund to stop distress sale of agricultural produce has been announced. The monthly pension of farmers has been increased from Rs 750 to Rs 1000, and the number of beneficiaries has been raised from 66,000 to one lac. The tea industry has been exempted from paying education cess, and rural employment cess. Under ‘‘Rupashree’’ there will be one-time hand-out of Rs 25,000 for marriage of a 18-year old daughter. ‘‘Manabik’’ assures monthly pension of Rs 1000 to pensions with 40% or more disability. There will be no mutation fee for agricultural land sold for farming. ‘‘Kanyashre’’ aid for girls to pursue college studies has been increased annually to Rs 1000 from Rs 750.

Jerusalem
Israel has always claimed Jerusalem as the capital of the Zionist state. Prior to 1967, the older eastern half of Jerusalem city was controlled by Jordan. The Arab-Israel conflict in 1967, resulted in Israeli soldiers in total control of the Sinai peninsula (earlier with Egypt), Golan Heights (earlier with Syria) and East Jerusalem (earlier with Jordan). After a long overdue settlement, Egypt has received its lost territories. Jordanian influence in the region has declined with the rise of Palestinian nationalism. In 1995, the US Congress first approved shifting the American mission to Jerusalem, but gave the White House the powers to defer the implementation every six months. Every President from Bill Clinton onwards routinely signed the six-month deferral. On 07 December 2017, President Donald Trump recognised Jerusalem as Israel’s capital, and ordered to start the process of moving the US Embassy from Tel Aviv to the holy city. Arab leaders warned of massive protests in the Middle East and elsewhere. The international community considers east Jerusalem illegally occupied by Israel, and most countries have their embassies in Tel Aviv. Moving the US embassy could take years to achieve and the US President will once again sign the six-monthly waiver, under a US Congressional law requiring it to be relocated. Following Trump’s decision to recognise Jerusalem as Israel’s capital there were protests and demonstrations in the occupied West Bank and Gaza. Clashes broke out between Israeli forces and Palestinian protesters, causing more than 100 Palestinians to be wounded, mostly from tear gas inhalation, live fire and rubber bullets. Israeli soldiers shot dead over sixty Palestinians men near the Gaza border.

IS Foreign Fighters
More than 40,000 people travelled from around the world to take up arms for the Islamic State group, as it occupied territory in Syria and Iraq, and declared a caliphate in 2014. Having lost most of its territory to campaigns by Western-backed Syrian and Iraqi coalition armies, a few hundred are still believed to be fighting as IS struggles to survive. Many thousands were certainly killed in the intense fighting. Some have travelled to other jihadist fronts in Northern Africa, like Libya, Somalia and Yemen; and elsewhere like Jowzian province in Northern Afghanistan and the Southern Philippines. Many IS fighters are blending with civilian refugees or bribing their way to sneak into Turkey.

Frontier
Vol. 50, No.33, Feb 18 - 24, 2018