Tag Archives: #economy

Education

INDIA’S MASSIVE TRADE DEFICIT WITH CHINA; LOWEST IN FIVE YEARS

India’s trade deficit with China sinks to $48.66 billion in 2019-2020 which is lowest in five years. Now what is the trade deficit? Trade deficit can be defined as an amount of imports of a particular country exceeding the amount of its exports. According to the data, exports to China in the last financial year stood at $16.6 billion, while imports accumulated at $65.26 billion. India and China are two very well-known countries with ancientCivilizations, their partnership in every major field like trades has made an ideal example since over 2000 years. But from the last few weeks the India- China relation has deteriorated. The main cause of the clash was a dispute over the sovereignty of the widely separated Aksai Chin and Arunachal Pradesh border regions. So, it can be assumed that this clash played a vital role along with lower imports and higher exports as the major cause of India’s significant reduction of trade deficit.

The major imports from China cover electronic gadgets (clocks, watches, smart phones, calculator, laptop etc.) plastic materials (toys, plastic containers, bottles), sports goods, musical instruments, furniture, chemicals, irons, mineral source, metals and fertilizers.

Foreign Direct Investment (FDI) from China in India fell to $163.78 billion in 2019-2020 from $229 billion in previous monetary, the data said. 14% India’s imports are recorded by China and the major portion comes from critical pharma ingredients and telecom.

 India was able to captivate FDI worth $2.38 billion from 2000 to March 2020 but in April the government has narrowed the standards for FDI coming from the neighboring countries especially which share a land border with India like China.  As per FDI, any company or individual can steep in any field with the government approval.

Top sectors like metallurgical (USD 199.28 million), services (USD 170.18 million), electrical equipment (USD 185.33 million) which showed maximum FDI from China in the period of April 2000- March 2020.

Around 371 products have been identified for technical regulations. Out of 371, technical regulations have been assigned for 150 products worth $47 billion of imports.

The reduced imports from China also helped the U.S. extend its lead as India’s largest training partner against trade off $88.8 billion with US India straight with China was just $82 billion. 2019-2020 year’s trade deficit of India is almost similar to 2014-15, when the Narendra Modi took first post, but it was 34% higher than 2013-14, stimulating the government to suggest that the further steps taken in recent months have yielded results.

In that definite time when entire world has been put off financially due Corona virus pandemic accompaniedby India-China war; in the standing of that point taking such steps like restricting the imports from China would be a great decision for India.

The Country and countrymen both are hopeful, at the same, of time what lies ahead in future.

“A large chunk of these originate from China. We will pursue import substitution,” a senior official said.

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Education

The largest manufacturer of iron and steel in the global economy: Can India ACHIEVE this peak position?

The iron and steel enterprises are among the most significant enterprises in India. During 2014 through 2016, India was the third biggest manufacturer of crude steel. In 2019 India turned into the second-biggest steel producer on the globe after China and the biggest manufacturer of steel and iron in the world.The Indian steel industry is at a precipice in its growth journey. The industry delivered 82.68 million tons of absolute finished steel and 9.7 million tons of crude iron. Generally, iron and steel in India are processed from iron metal.

Fast increase underway has brought about India turning into the second-biggest producer of rough steel during 2018, from its third-biggest status in 2017. The nation is additionally the biggest manufacturer of Sponge Iron or DRI on the globe and the third biggest completed steel customer on the planet after China and the USA.

With the vision of a $ 5 Trillion economy by 2024-25 and the Rs 100 Lakh Crores arranged interest in framework, it is essential to shape the steel business to fulfil the need that is probably going to increment over the coming years. Guaranteeing that the country is set up to deal with this envisioned increment will require purposeful exertion over different approaches including limit extensions, value expansion, trade balance enhancement, coordination foundation upgrade, and R&D. This will involve close cooperation among the different partners in the steel esteem chain – Government (Central and State), steel makers, steel clients, the scholarly world, and lenders.

India’s per capita steel expenditure is as of now at a normal of 74 Kgs for every capita versus a worldwide normal of ~255 Kgs per annum. With the push on steel used in all going sectors, for example, framework and construction, the utilization is relied upon to increment in an accelerated trajectory. Government plans like Housing for all, Jal Shakti, and the subsequent ventures they will drive into streets, railroads, and other foundations will be significant drivers for the development of the steel division in India. Steel is and will keep on being significant for the country working regarding esteem creation and generating employment. The Indian steel industry should be set up to meet the prerequisites that will emerge out of this vision.

India’s steel industry: Journey so far

  • 1875 Bengal Iron and Steel Company in Barakar
  • 1907 Establishment of Tata Iron & Steel Company (TISCO)
  •  
  •  1954 Set-up of Hindustan Steel Pvt. Ltd. 1962 Completion of Durgapur, Bhilai and Rourkela steel plants 1973 New model for managing the steel industry presented to the Parliament; set-up of SAIL
  • 1991 Government of India liberalizes the steel sector by removing iron and steel industries from the reserve list 2005 India becomes one of the top 10 steel producers in the world.
  • 2018 India becomes the world’s second-largest producer of crude steel 1937 Establishment of Steel Corporation

NSP (National Steel Policy) – Vision, Mission & Aim

Vision: To make a creatively advanced and all around competitive steel industry that progresses monetary development.

Mission: condition for accomplishing –

  • Self-adequacy in steel creation by giving strategy support and direction to private producers, MSME steel manufacturer, CPSEs, and encourage satisfactory limit augmentations.
  • Development of all-around competitive steel-producing abilities.
  • Cost-proficient creation and household accessibility of iron metal, coking coal, and petroleum gas.
  • Facilitate interest in abroad resource acquisitions of crude materials.
  • Enhance domestic steel orders.

Aim: The National Steel Policy targets accomplishing the accompanying goals –

  • Build an all-around competitive industry
  • Increase per Capita Steel Consumption to 160 Kgs by 2030-31
  • To locally fulfil the whole need of high evaluation car steel, electrical steel, unique prepares and composites for vital applications by 2030-31
  • Increase private accessibility of washed coking coal to decrease import reliance on coking coal from ~85% to ~65% by 2030-31
  • To have a more extensive nearness all around in esteem included/high evaluation steel
  • Encourage industry to be a world chief in vitality effective steel creation in a naturally supportable way.
  • Establish local industry as a savvy and quality steelmaker
  • Attain worldwide norms in Industrial Safety and Health
  • To considerably lessen the carbon impression of the steel business

Export Promotion of Iron & Steel Products

  • The conspire empowers exporters to import pertinent crude material and different contributions to the required amounts, obligation-free for the creation of the export item.
  • Quantities of import are permitted according to standard info yield standards (SION) endorsed by DGFT or according to self-pronounced standards by the exporters subject to confirmation of the DGFT.
  • Ministry of Steel (Technical Wing) helps the Advance Authorization Committee/Norms Committee in DGFT/in the endorsement of the self-revelation standards or something else.
  • Service of Steel additionally encourages DGFT to fix new standards (Standard Input-Output Norms) and additionally to audit existing standards in meeting with industry/specialists/advisors.

The direction towards a boost

  • The iron and steel industry required extensive arrangements for modernization, up-degree of innovations, the substitution of out of date gear and evacuation of mechanical awkward nature.
  • Presently, the administration is attempting to help the business through the RBI’s vital obligation rebuilding plan. Be that as it may, it needs long haul money, for example, benefits reserves, investment funds and so forth which can withstand repeating instability of benefits not at all like financing from banks or capital markets.
  • Anti-dumping obligations on modest import to secure local makers.
  • More centre around the framework and vehicle industry to expand residential interest and occupation creation to offset worldwide log jam.
  • Servicing of awful credits by the government to give capital and looking into the validity before dispatching the advances.
  • Increased outside speculation.
  • More accentuation on Green Climate Fund to acquire condition inviting innovation.
  • Decrease iron mineral fares to guarantee crude material supply.

Chintan Shivir: towards a Vibrant, systematic and Globally Competitive Indian Steel Sector

  • The Chintan Shivir occasion hung on 23rd Sept. 2019 at New Delhi and was conceptualized with a reasonable topic under the vision and targets “Towards a Vibrant, systematic and Globally Competitive Indian Steel Sector” and included support from more than 900 members across Government (Center, State), CPSEs, private division, research foundations, counselling and banking parts. The short brief is as under:

Domestic Capacity Expansion with Special Reference to Secondary Steel Sector: The auxiliary steel division in India right now contributes over 40% of the all-out limit and it should assume an essential role for India to arrive at 300 MT limit. This conversation accordingly planned to recognize difficulties to limit extension in the nation with a unique spotlight on optional steel and to correspondingly talk about on proposals on lightening these.

  • Demand Generation: Despite being the third biggest steel customer on the globe, India has per capita steel utilization that is just a single-third of the world’s normal. This meeting accordingly meant to talk about, consider and distinguish proposals to build the per capita utilization of steel in the nation.
  • High-Grade Steel Production: Despite being a little portion of imports by quantity, alloys and tempered steel contribute lopsidedly to the import bill by esteem. Henceforth, this meeting dove into interesting difficulties for the unique steel division and laid out possible proposals to empower India to rise as a key player in high evaluation steel.

India overtook Japan

India has supplanted Japan as the world’s second-biggest steel-producing nation, while China is the biggest producer of unrefined steel representing more than 51 per cent of production, as stated by the World Steel Association (world steel).

The worldwide steel body in its most recent report noticed that China’s crude steel yield bounced 6.6 per cent to 928.3 million tons (MT) in 2018 from 870.9 MT in 2017. China’s share expanded from 50.3 per cent in 2017 to 51.3 per cent in 2018.

“India’s unrefined steel production in 2018 was at 106.5 MT, up by 4.9 per cent from 101.5 MT in 2017, which means India has supplanted Japan as the world’s second-biggest steel-producing nation. Japan created 104.3 MT in 2018, down 0.3 per cent contrasted with 2017,” world steel said. Worldwide unrefined steel creation arrived at 1,808.6 MT for the year 2018 from 1,729.8 MT in 2017, an ascent of 4.6 per cent, it said

Education

CRYPTOCURRENCY : -A PROMISING FUTURE ?

Crypto currency is something that everyone wants to talk about but very few have the idea about how it works.

Since human civilization has emerged, the currency has been a very crucial part of their lives. In the caveman era, they used to exchange their things which are famously termed as “barter system”. Suppose, Ram has seven mangoes and his friend has seven apples but Ram needs seven apples. What can Ram do now? He can exchange his goods with his friend via the barter system. But there were various flaws in barter system like lack of a common measure of value (seven apples may not have the same value as seven mangoes), lack of double coincidence of wants, unable to divide into smaller units etc.

After realizing that the barter system did not work very well, and thus currency went through a few recurrences in 110 BC; later “Currency” was coined officially. Thousands of 250 AD gold plated Florence was introduced which was only used in limited countries. From 1680-1980, the paper currency gained significant popularity and was used across the world. This is how modern currency came into existence.

Modern currency included paper currency, coins and credit cards and digital wallets like Amazon Pay, PhonePe and so on.

WHAT IS CRYPTO CURRENCY?

It is a new form of digital resource or virtual currency based on a network that is distributed across a huge number of devices.

The word “crypto currency” is derived from the encryption technique which is used to secure the end to end networks.

All the digital wallets (PhonePe, PayPal, Paytm etc.) are controlled by banks and governments. This means it is regulated by authorities and it may increase some hazards like a technical issue at the bank while transferring money, limited transaction and so on. This is why the future with currency lies with crypto currency. There are more than 1600 crypto currencies are available. Bitcoin, Litecoin, Ethereum, Z-cash are some popular ones.

PERKS OF CRYPTO CURRENCY:

  1. Self-governed and well organized.
  2. Payment can be processed within a few minutes.
  3. Authentication of users’ identity.
  4. Removes all the problems of modern banking.
  5. The unlimited fund can be transferred.
  6. Cost-effective mode of transaction.
  7. Decentralized and secure.

CRYPTO CURRENCY VS BITCOIN:

Bitcoin is also a digital currency that utilizes crypto currency and it is regulated by decentralized authority unlike government-issued currency whereas the crypto currency uses encryption technique which acts as an intermediate for the different financial transactions all over the world.

DRAWBACKS OF CRYPTO CURRENCY:

  1. There is no restriction to illegal transactions.
  2.  More prone to hacks.
  3. Limited crypto currencies can be traded only in one or a few fiat currencies.

CRYPTOCURRENCY AND TODAY’S WOLRD:

The whole world is distinctly divided when it makes headway to crypto currency. On one side, there are supporters like Bill Gates, Richard Branson who believe that crypto currencies are better than regular. And on another side, people like Warren Buffet, Paul Krugman who are absolutely against the crypto currency. They both are Nobel Prize winners in Economics and they think it is a fraudulent investing scam and means for criminal activities.

It can be assumed that in the future there is going to be a conflict between regulation and anonymity as crypto currencies ensure that its users are kept anonymous. Despite having some disputes, the use of crypto currencies in the merchant’s navy is increasing, which carries a positive vibe.

By the year 2030, crypto currency would captivate 25% of national currencies which is a notable chunk of the globe and that would be a remarkable step in economical evolution.

Education

The $5 Trillion economy : reality or distant dream

The economy of India, a developing market economy as considered by many, is the 5th largest economy by nominal GDP and the 3rd largest by purchasing power parity (PPP). The IMF ranked India in 139th by GDP (nominal) and 118th by GDP (PPP). The protectionist economic policies adopted since independence and consecutively the acute payment crisis post-Cold War led to the adoption of various policies for economic liberalisation in 1991.  The 21st century has witnessed an annual average GDP growth of 6% to 7%. The years of 2014-2018 saw the unfolding of India as the world’s fastest-growing major economy, surpassing China.India’s GDP is driven by domestic private consumption making it the world’s sixth-largest consumer market at nearly 60%.  However, apart from this, the Indian economy is also stimulated by government spending, investment, and exports. India emerged as world 10th largest importer and 19th largest exporter in 2018. Statistically speaking, India ranked 63rd on ‘ease of doing business’ index and 68th on the Global Competitiveness Report. By 2019 India emerged as the world’s 2nd largest in terms of the labour force. A 2017 PricewaterhouseCoopers (PwC) report, India’s GDP at purchasing power parity could overtake that of the United States by 2050. India has young demography which results in a low dependency ratio, healthy savings and investments that have helped the economy to steadily grow over the years. Moreover, the incorporation of the Indian economy with the world economy has also aided this process.

The economic growth, however, slowed in response to ‘Demonetisation’ and ‘Goods and Services Tax (GST)’. Let us look at how these two measures actually impacted the economy in the beginning:

Demonetisation:                                                   

This move was announced on November 8, 2016, by the government in light of turning the economy into a “cashless economy”. This move was intended to put a dent on the practices by black money hoarders. Elimination of terror funding or fake money haunting the economy would, in turn, make it more transparent. However, pieces of evidence have shown that as time passed by, the idea behind demonetization might have failed miserably and did not achieve any significant change in the spheres of economic growth or transparency. “Let us ignore the temporary hardship, let us join this festival of integrity and credibility, let us enable coming generations to live their lives with dignity, let us fight corruption and black money,” said Modi in his speech regarding demonetisation. The government’s move caused the elimination of all Rs 500 and Rs 1,000 notes and made them invalid. These notes constituted 86.4% of total currency in circulation in the Indian markets. Disordered 3 months followed after demonetization triggering serious monetary issues for most of the Indian populace. Gabriel Chodorow-Reich of Harvard and Gita Gopinath of the International Monetary Fund (IMF) in their research paper, “Cash and the Economy: Evidence from India’s Demonetisation“, claimed that this move brought down the Indian economic growth. Along with this, another unintended outcome was 2-3% reduction in jobs in the quarter of note ban. Economic activity had already deteriorated by 2.2% in November and December 2016 revealed the research. “About 1.5 million jobs were lost during January-April 2017. The estimated total employment during the period was 405 million compared to 406.5 million during the preceding four months, September-December 2017,” a report by Centre for Monitoring Indian Economy (CMIE) stated. In 2018, former RBI governor, Raghuram Rajan said, “The two successive shocks of demonetisation and the GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking up.”

Goods and Service Tax:        

The government’s decision to implement Goods and Services Tax (GST) has attracted mixed reviews. The principle of “one nation, one tax, and one market” is aimed at unifying this large economy although acted as a catalyst towards the worsening situation of the economy. The inflation rate has increased from 1.79 % to 5.11 % since July 2017 and continued till January 2018. This was a result directly related to the changing demand and consumption level of the poor people in India. India’s economic growth that was 8.4% in 2015 dropped sharply to 5.7% in July 2017. This complex system of indirect tax is finally recovered from consumers of goods and services increasing in sale price. Thus, irrespective of the consumer’s financial standing pays the same amount of GST for one unit of any product or service he avails in the market and here in India. This has acted as something counter-productive to the economy. Furthermore, GST increased tax appropriated by the government, making it the second-highest tax rate in the world (28%). This has had a negative impact as 29.9% population of India lies under Below Poverty Line (BPL) and 20% of India’s population dominates 47.7% of the total wealth of the nation giving rise to high-income inequality. Also, the implementation of the scheme of GST escalated unemployment rate (3.39-6.06 %) during the period of July 2017 to February 2018 in India.

Nevertheless,Prime Minister Narendra Modi in 2019 declared that he would like India to become a $5 trillion economy by 2024. This vision has been claimed as “challenging, but achievable” by the finance minister, Nirmala Sitharam. Several scholars and researchers have claimed that for the Indian economy to grow into a $5 trillion one by 2024, it will need to grow at a rate of 12% per year. Former RBI governor, C. Rangarajan said, “$5 trillion is a good aspirational goal. But please understand that a $5 trillion economy in a matter of 5 to 6 years cannot be achieved unless the economy grows in a sustained way between 8 and 9 per cent.It has to be closer to 9 per cent because today the Indian economy is $2.7 trillion. So, $5 trillion means almost doubling the size of the economy. And that is possible only if the economy grows at 9 per cent per annum in a sustained way for 5 to 6 years.” He opined that to qualify a country as one having a developed economy, the per capita income needs to be around USD 12,000. This level of growth was pegged to be possible solely at a steady rate of 9% per annum. The blow to the economy by Demonetisation and the implementation of GST was worsened by the crisis of COVID-19. The pandemic wreaking havoc around the globe in 2020 has successfully harmed the economy of India in an unprecedented way and thwarted its plan to become a $5 trillion economy by 2024. “My own estimate is that the 21-day countrywide lockdown which has been enforced, itself will result in shaving off at least 1 percentage point of GDP. And if you take earlier problems created by the coronavirus pandemic before the lockdown and the uncertainties of the future, then a 2 percentage points decline in growth rate (for 2020-21) is not unlikely at all,” said former finance minister Sinha. The economy took a hard hit as a result of the nation-wide lockdown to curb the pandemic. People are unable to work, supply chains have been gravely affected, and the labour has been forced to migrate back. The revised Gross Domestic Product (GDP) estimates for India downwards by 0.2-4.8% for the fiscal year 2020 and by 0.5-6% for the fiscal year 2021. Another major barrier to India’s economic growth is that it relies heavily on Chinese imports. Electronic imports to India account for 45%, automotive parts and fertilizers are pegged at 25%, active pharmaceutical ingredients range from 65-70%, and there is around 90% import of mobile phone from China to India. The discontinuation of these imports has given rise to several issues in the market which most probably will lead to an increase in the prices. Moreover, the recent clash between India and China will also have a serious impact on the economy. Furthermore, data reveals that 72% of the Indian companies are located in China (Shanghai, Beijing, provinces of Guangdong, Jiangsu, and Shandong). These provinces were the first to get the hit by a coronavirus. Thereby, leading to a complete stop at their activity. The effect of the pandemic has been felt by almost all business sectors. This hit will lead to a decrease in the GDP of 2021 and thus, we can bid goodbye to the dream of the emergence of the Indian economy as a $5 trillion giant. In addition to this, the MSME sector accounts for 30% of our country’s GDP which is at the moment at a vulnerable position due to the restrictions imposed. Statistics have shown that the dependence of Indian economy on three major contributors to GDP, namely,‘private consumption’, ‘investment’, and ‘external trade’ will all be affected immensely and thus, will cause a great deal of damage to the economy. In the backdrop of all these issues, the growth of the Indian economy into $5 trillion seems to be something impossible. The target set by Prime Minister Modi to make India a $5 trillion economy by 2024-25 might be delayed by 2 years even if the economy grows at a steady rate of 7.5% a year on average post current financial year. This is rate is, however, based on the 4.5% inflation rate that the economic survey for 2019-20 explained to achieve the target. To push the economy towards the goal, an increase of investments are required. Hence, infrastructure development is considered to be a critical aspect for achieving a $5 trillion economy as it can kick start a cycle of investments. However, the prevailing situation impedes any such measure that might help the economic situation and aidin the further realization of the dream.