Get subscribed to our newsletter
Get interesting updates to your email inbox.
Union Finance Minister Nirmala Sitharaman on Saturday hailed UP chief minister Yogi Adityanath for taking the state to the path of development, saying that Uttar Pradesh will soon emerge as a shining example for others in time to come.
Sitharaman was on a trip to Uttar Pradesh during which she asserted that in the last four to five years a series of world-class infrastructure projects such as Purvanchal Expressway, Bundelkhand Expressway, Gorakhpur and Ballia Link Expressway and now Ganga Expressway have been initiated in the state which will take the state on the road to a 'new' Uttar Pradesh.
"The thought behind the Prime Minister's Vocal for Local is clearly reflected in the One District One Product (ODOP) scheme here," she added.
Further referring to the Uttar Pradesh Defence Corridor, she said that the state, which was known for agriculture and MSME sectors, not only showed interest in undertaking such big and important projects, but has also been executing them successfully.
Terming it as a grand success, Sitharaman credited it to the 'visionary' duo of Prime Minister Narendra Modi and Chief Minister Yogi Adityanath.
The Finance Minister was giving her views in a meeting organised for Ganga Expressway at Indira Gandhi Pratishthan on Saturday.
Appreciating the Yogi government for giving 'meaningful' direction to the government policies, she said that the promptness and success with which the schemes of the central government have been implemented in the state is an example for others.
The meeting, chaired by Chief Minister Yogi Adityanath, was to find ways how to raise finances for the Ganga Expressway project.
In the meeting, Managing Director & CEO, Punjab National Bank, S.S. Mallikarjuna Rao handed over the Rs 5,100 crore loan sanction letter to the state government for the project.
The Chief Minister said that the Ganga Expressway, which will be built from Meerut to Prayagraj, would be the backbone of the Uttar Pradesh economy.
Yogi said that the Finance Minister, in her Union Budget 2021-22 speech, had articulated the broad concept of National Infrastructure Pipeline and National Monetisation Pipeline, emphasising on the development of necessary infrastructure for coordinated development in different parts of the country.
"In order to mobilize the required financial resources for the infrastructure projects, the Union Finance Minister had suggested the method of monetization. Taking the concept forward, the Uttar Pradesh government has finalised the process of securitisation based loans from banks as a part of raising finances for Ganga Expressway," the Chief Minister noted.
State Finance Minister Suresh Khanna said that the state government has added many new dimensions in the field of all-round industrial development of the state in the last four years.
Keywords: UP, economy, sitharaman, yogi adityanath
Think Change Forum, an independent think tank dedicated to seeking solutions for navigating the post-pandemic world, today announced a new initiative aimed at bringing together some of the most reputed thinkers for developing new ideas to reboot the Indian economy.
Called, ‘Ideas for Rebooting Indian Economy in the Post Pandemic World’, this initiative aims at holistically looking at select areas of the economy which can create a lighthouse effect and accelerate the pace of growth for the country.
Follow NewsGram on Twitter to stay updated about the World news.
The world is still recovering from the aftermaths of the Covid pandemic. It will take an entire decade for Governments across the world to succeed in rebuilding their economies to the desired levels. India however is positioned at an opportune fulcrum, to seize a larger role in this redevelopment, provided it takes the right steps quickly. It is in this context that the Forum’s dialogue series aims to focus on specific areas which can have a catalyzing effect on the overall economy.
The first event of the series was a high-powered panel discussion based on analyst and commentator Sanjaya Baru’s discourse, ‘The Secession of the Successful’. The inaugural webinar, which included scholars such as Baru, economist and NIPFP professor, Ila Patnaik; International Relations expert Amitabh Mattoo; and, the noted historian of science Deepak Kumar, dwelled on the issue of the flight of talent and wealth capital out of India and how this challenge needs to be tackled. The speakers were unanimous in their opinion that arresting the outflow of both these types of capital was absolutely necessary to realize the dream of a self-reliant or ‘Aatmanirbhar Bharat’.
The thrust of the deliberations centered around two key issues. One, the wealthy, intellectual, human resource flight from India to the nearby as well as the traditionally ‘advanced’ nations, and Two, the money capital flight by way of non-residents and tax-haven seekers who are happy to stay abroad while investing or working in India. The classical drain of resources, especially humans, was due to poverty and lack of opportunities here. Today, well to do, educated individuals have no qualms un-packing and leaving for greener pastures. The peculiar issue of HNW Indians going in for dual-passports and investing outside India for better returns was also highlighted. (IANS/SP)
The VUCA — Volatile, Uncertain, Complex, Ambiguous — world we live in has become an all-pervasive mega-trend, dramatically changing the lives of individuals, business models of enterprises, and the Indian economy. It requires unlearning the old rules and learning the new or losing unrecoverable ground, says Nitin Seth, an accomplished industry leader with a unique combination of experiences as a global manager, entrepreneur, and management consultant, who has distilled his experiences into a framework of seven building blocks necessary for successful digital transformation.
Most enterprises have embarked on some variation of digital transformation but their impact often falls short of expectations by 70 percent as “the core issue is that enterprises have not recognized how many business fundamentals have changed in the Digital Age and continue to take their existing business models, infrastructure, and approaches and apply it to digital age problems and opportunities”, Seth writes in the seminal book, “Winning in the Digital Age” (Penguin Enterprise).
Follow NewsGram on Facebook to stay updated.
“It is clear if you apply old world formulas to new world situations, your outcomes can only be sub-optimal,” maintains Seth, who held top management positions with McKinsey (two spells), Fidelity, and Flipkart before founding Incedo Inc., a high-growth technology services firm focused on Digital Transformation and Analytics.
“Incremental thinking no longer works, If you don’t think differently, someone else will cannibalize your business or your skillset. Therefore, we all need a new mindset and set of principles to succeed in this digitally disrupted world or risk losing ground,” Seth adds.
This means coping with an “unprecedented velocity of change” that includes technology disruption, changing expectations of customers who are digitally savvy and demand high-quality experiences and solutions, an explosion of data from multiple touchpoints, geopolitical uncertainty, and shortening business and product cycles. Thus, what is required are drastic changes in the educational system to prepare the generation to enter the job market and reskilling those already in the workforce.
“For learning and development overall, I believe there are four key shifts that need to occur as a result of the power of Digital Technology.
“First, a shift from one-size-fits-all learning, to a high degree of personalization.
“Second, there has to be a shift from standard predetermined push-based learning sessions to bite-sized, self-directed learning lessons.
“Third, learning needs to move from a classroom style to be multi-dimensional and channel-agnostic, which involves innovative approaches so that digital natives are engaged.
“Fourth, a move from hard skills focus to a soft skills focus. Shifting learning and development in these four ways will ensure more individuals are prepared for 21st-century jobs which will require lifetime learning skills,” Seth explained.
What then, are his seven mantras?
* New Rules of Business at three different levels: the general level of the VUCA world, the digital transformation level, and the level of specific technical elements of digital.
* Industry Maturity Curves: The protracted work-from-home situation resulting from the Covid-19 pandemic has given a significant boost to digital penetration in every industry we are operating in.
* Digital Technologies: These are not independent but interconnected; enterprises realize transformative value when these digital technological building blocks are connected end-to-end. Data is the fulcrum of digital. It can trigger a virtuous cycle; equally, data challenges can quickly escalate into a vicious cycle.
* Global Delivery Model: Every enterprise in the digital age has to be a global enterprise. Enterprises can develop this global footprint either by partnering with service companies or by establishing their own dedicated technology operational centers. A Global Delivery Centre covers both these entities.
* Organisational Transformation: This is probably the most important enabler of digital transformation. In addition to culture, there are at least seven organizational capabilities that are key to sustained success in the digital age ï¿½ proprietary knowledge building and sharing, innovation, agility, learning, diversity, change management, and enabling functions like HR and finance.
* Entrepreneurial Leadership: In an era of unprecedented uncertainty and change, traditional tools of management like structure, strategy, planning, and policies do not just lose effectiveness, but can also become a roadblock. Instead, you need vision, inspiration, intuition, collaboration, and the ability to constantly adapt. ï¿½Managers to Leaders’ has become an absolute imperative in the digital age.
* Next Generation Talent: Prior experience and successful track records are less relevant than before because you need to unlearn the old and learn the new rules of the game. Prominent among the requirements are continuous learning, creativity and innovation, tech DNA, agility, management of duality, and spiritual and ethical balance.
“My advice for young professionals is that digital is a great equalizer, it presents discontinuous opportunities for them. There are vast opportunities for young professionals and this should liberate them to explore, find and live the unique purpose of their own lives. They should consider being an entrepreneur since digital disruption is creating a host of new business opportunities and risks are relatively low with high returns. Finally, they need to build strong problem-solving and decision-making skills.
“The VUCA world we are living in is characterized by high volatility and complexity. So, problem-solving and effective decision-making skills have become more important than ever before. These are foundational skills that every young professional should build in the digital age, irrespective of his or her choice of career,” Seth explained.
Finally, 21st-century leadership more than ever is about managing duality. “The Digital Age poses many contradictions that leaders need to respond to – vision/strategy versus execution, growth versus profitability, short-term versus long-term, customer versus employees, data versus intuition, man versus machine, and many more. It is not enough to find the trade-offs on these complementary values, but leaders need to find win-win solutions. This increased need to manage duality is an important expectation of leaders in the Digital Age,” he maintained.
What next? What’s his next project?
“I am now writing my next book on Spirituality and Leadership that is a necessity to win in the Digital Age. With so much chaos and disconnectedness in this Digital Age, being centered and connected with the inner-self is crucial to realizing purpose. Finding the balance between Spirituality and Materialism is an often ignored key to succeed and must be found by each one of us,” Seth concluded. (IANS/SP)
Most of us awaited Indias Union Budget 2021-22 for its fiscal policy strategy to support growth, as the economy slowly emerges from the pandemic. Given previous episodes of shortfalls in realized receipts and rising off-budget expenditure, one was also ready to calculate more likely receipts and the true fiscal deficit. As mentioned in our previous note (link), the budget was a pleasant surprise as it estimated tax revenue conservatively, unlike recent years and vs. expectations this year. It also took a firm step towards reducing the rising off-budget financing, and has started repaying corresponding dues, by directly funding these through the government balance sheet. This enhances transparency but has also increased the budget size well beyond most of our estimates.
The other theme which stood out was the thrust on capital expenditure (capex) in FY21 and FY22, the best option now within counter-cyclical spending, given its higher growth multiplier (vs. revenue expenditure) through the job creation and private participation it draws. We look at the impact of the government balance sheet clean up in detail, states’ fiscal position and role in capex, conservative revenue estimates and its implications. Further, being at the juncture when generating sustainable, inclusive and higher growth is vital, various measures of adjusted expenditure and capex imply the growth impulse of this budget could be lower than what the headline numbers suggest. This makes execution all the more critical, with implications also for the fiscal glide path envisaged and thus sovereign debt sustainability.
Please Follow NewsGram on Facebook To Get Latest Updates!
Food (subsidy) on a cleaner plate
Government expenditure on food subsidy towards the FCI was being partially funded through loans from NSSF to FCI, since FY17. This arrangement reduced the government’s fiscal deficit and did not increase its debt. The government has now taken food subsidy on its budget, utilising its cash surplus. It plans to start repaying the outstanding dues to NSSF from this year and fully stop the NSSF funding to FCI from next year. Firstly, FCI will repay NSSF Rs. 2.2 lakh crore in FY21 and Rs. 55,000cr in FY22, using government funds, thus freeing up NSSF space for financing the fiscal deficit. Further, food subsidy this year is higher (Rs. 2.87 lakh crore funded through budget and NSSF), owing to the additional food grains distributed as part of the government’s response to the Covid crisis. These are revealed as higher on-budget food subsidy – Rs. 4.2 lakh crore in FY21 (vs. BE of Rs. 1.6 lakh crore) and Rs. 2.4 lakh crore in FY22. After this, food subsidy incurred by FCI in FY23 should fall back to Rs. 1.8-2.0 lakh crore but the subsidy number on the budget would most likely also include the final repayment of Rs. 64,000cr which FCI would owe NSSF at the end of FY22. NSSF would also need to be repaid another Rs. 1.7 lakh crore, its outstanding dues at end-FY22 from all other PSEs ex-FCI it funded.
Funding of the food subsidy has thus been rationalised but the subsidy amount itself is getting quite high. This year’s Economic Survey suggested a consideration of the revision of the Central Issue Price, given rising food security needs could make it difficult to reduce volumes. However, even this could practically prove difficult.
Another Extra Budgetary Resource (EBR) mobilisation was through the Government Fully Serviced bonds (FSBs), which was used to fund schemes under various Ministries, and did not impact the government’s fiscal deficit and debt. This funding route is also planned to be stopped in FY22 from 0.3% of Gross Domestic Product (GDP) in FY19 and 0.2% in FY21. Public Sector Bank (PSB) recapitalisation bonds, which impact only the government debt and not the fiscal deficit, are still active although its usage has fallen from 0.6% of GDP in FY19 to 0.1% each in FY21 and FY22.
Nudging the states for capex
Devolution to states, from the gross tax revenue collected by the central government, is down from 37% in FY19. This has fallen across tax categories but is primarily due to the higher excise duties and cesses collected which are not fully shareable with states. Devolution is estimated to be 28.9% in FY21, with equal offsetting adjustments for excess given to states in FY20 and deficit due to them in FY19, after which it is budgeted to increase marginally to 30% in FY22. However, given conservative tax revenue estimates by the central government for FY21 and FY22, there could potentially be an upside to devolution from better tax buoyancy. Any additional amount for FY21 would likely be received only in FY22. Similarly, any excess devolution for FY22 will depend on the tax buoyancy then, but the amount received in FY22 would also depend on the centre’s FY22RE calculation next year.
Transfer to states (ex-loans given in lieu of the GST shortfall of Rs. 1.1 lakh crore in FY21, which is separate from devolution, is also budgeted to rise Rs. 69,000cr y/y in FY22, of which revenue deficit grants will be up Rs. 44,000cr. States have been provided a normal net borrowing limit of 4% of GDP for FY22, but a part of it will be tagged towards incremental capex, with another 0.5% of GDP to be conditional. While this could nudge states in the right direction, the feasibility of specific targets and its acceptability by various states will have to be seen. States account for ~60% of total annual capex and was expected to fund 39% (same as the Centre) of the National Infrastructure Pipeline (NIP) as at end-2019.
Conservative revenue estimates – a good problem?
On tax revenue estimates, even the FY21RE numbers appear very conservative. This is because it implies gross tax collection during Jan21 to Mar21 to contract 10% y/y, at a time when it has started picking up strongly (33% y/y in the Dec20 quarter). For reference, even if we assume full year FY21RE tax collection grows only at the %y/y rate seen during the Apr20-Dec20 period (which would be low due to weak collection early on), and accept the government’s high expenditure estimate, FY21 fiscal deficit would be lower from the government’s estimate by Rs. 85,000cr or 0.4% of GDP. The cyclical recovery likely underway, delinking witnessed between mobility and Covid cases, sequentially better demand as the economy reopens and vaccination progresses and higher tax compliance (e.g. for GST) would be the driving factors. However, for now, this implies lower tax devolution to states based on FY21RE.
It wouldn’t have been a surprise if the government had assumed a slightly higher tax buoyancy in FY22, given it tends to undershoot growth in a recessionary year and then overshoot in the recovery year. However, the overall gross tax revenue is estimated to grow 16.7% y/y, only slightly above the 14.4% nominal GDP growth estimated which itself carries an upside risk. This provides the much needed space to accommodate a shortfall in other receipts or higher expenditure or maybe even settle for a slightly lower fiscal deficit as deemed fit later.
Capex thrust – details imply lower growth impulse
Total public sector deficit rises in FY21 (80% of which is due to rise in centre’s fiscal deficit from the clean-up) and falls in FY22, but it stays well above FY20 levels. Of this, resources of PSEs ex-internal resources fall from 2.4% of GDP in FY20 to 1.6% in FY22. This is fully classified as off-budget capex and the drop in FY22 is mainly driven by the fall in food subsidy funding and support to Railways, while resources towards power, steel, petroleum and natural gas ministries have actually risen. Thus, consolidated capex (total on and off budget) stays flat from FY21BE to FY21RE as the higher capex on budget is offset by lower capex off budget. However, this has brought more capex on budget and increased transparency. Further, it increases only 4.8% y/y in FY22 vs. the 26% increase in on-budget capex. This implies the overall capex and thus the impulse to growth it provides is lower on a consolidated basis. In terms of the quality of the mix of spending, share of on-budget capex in on-budget expenditure rises sharply in FY22 to well above pre-Covid (FY20) levels but, on a consolidated basis, the rise is lesser in FY22 and is estimated to be below the pre-Covid share which itself was falling since FY19.
The government has provided a special Loan of Rs. 79,398cr to the Railways in FY21, which is included in its capex, for Covid related resource gap in FY21 and to liquidate adverse balance in Public Account in FY20. One could strip this from the FY21 capex number. However, it can also be argued that there has been a drop in the Railway’s budgetary support (capital expenditure for the Centre) by Rs. 41,000 from FY21BE to FY21RE, which is more than offset by the special loan and thus only the additional portion of the loan (Rs. 38,398cr) should be stripped. We see consolidated capex growth in FY21 further dropping in these scenarios. Similarly, one can also deduct the expenditure clearly understood to be non-capex in nature, from the off-budget capex headline number (e.g. food subsidy component), but this may not be consistently comprehensive.
Implications beyond FY22 – fiscal glide path and debt sustainability
FY22 fiscal deficit falls sharply as expenditure through the budget is estimated to grow only 1% y/y and revenue recovers from Covid-hit FY21. After FY22, further consolidation would be more gradual as seen from the fiscal glide path itself. So, to get to a fiscal deficit of below 4.5% of GDP by FY26, we will need growth to keep receipts buoyant and/or expenditure management. So, 1) timely and effective execution of incremental capex using the NIP (42% of identified projects was already under implementation as at end-2019) is vital so that maximum growth multiplier kicks in and lifts medium term growth beyond FY22, 2) asset monetisation and disinvestment strategies have to continue beyond the 1-2 year horizon and 3) expenditure optimisation would also matter as private sector spending slowly kicks in with the public sector capex push, cyclical recovery and Production Linked Incentive (PLI) schemes. The Economic Survey cites research on how counter-cyclical public spending in developing economies can actually crowd in private investments, through the utilisation of unused resources, employment creation and expansion of the savings pool available for funding. However, given the economy’s experience post the 2008 crisis and with the 2013 taper tantrum, it would be reasonable to expect macroeconomic parameters, like the current account deficit, and its thresholds to be guiding factors in optimizing fiscal policy.
Further, India’s primary deficit (fiscal deficit ex-interest payments) falls only to 3.1% of GDP in FY22 from 5.9% in FY21. While it could be slightly better, given current tax assumptions are conservative, it would still be well above the average of 0.4% from FY17-FY19. It is to be seen how the government exactly views debt sustainability. While the RBI’s latest Financial Stability Report flagged the increase of sovereign debt, to levels that raise concerns about sustainability and crowd out the private sector in terms of volume and cost of borrowing, the Economic Survey argued India’s sovereign debt will remain sustainable even at high primary deficits, given nominal growth is expected to stay above the nominal borrowing cost. (IANS)
– By Sreejith Balasubramanian
(Sreejith Balasubramanian is Economist — Fund Management, IDFC AMC. The views expressed are personal.)