Editorials/Opinions Analysis For UPSC 13 June 2022

Editorials/Opinions Analysis For UPSC 13 June 2022

Contents

1. What India must do to protect its ties with the Islamic World
2. India is not the fastest growing Big Economy

What India Must Do To Protect Its Ties With the Islamic World

Context

A controversial remark by the ruling party spokesperson against the Prophet has snowballed into a diplomatic row. Against this backdrop, New Delhi should not stop engaging the Gulf countries and strive to move beyond damage control.

Relevance

GS-II: Effect of Policies and Politics of Developed and Developing Countries on India’s interests, Indian Diaspora

Dimensions of the Article

• International reaction against the remarks
• Why WANA is important for India
• Way Forward

International reaction against the remarks

• The United Arab Emirates, Oman, Indonesia, Iraq, the Maldives, Jordan, Libya and Bahrain have joined the growing list of countries in the Islamic world that have condemned the remarks.
• Earlier, Kuwait, Iran and Qatar had called Indian ambassadors to register their protest, and Saudi Arabia had issued a strongly-worded statement.
• Campaigners (including a few GCC regimes) demand that Prime Minister of India should tender an apology for all that happened.
• But New Delhi’s stance is categorial and legitimate insofar as the Union government has nothing to do with such unsolicited comments.

Why WANA is important for India

• Engagement with WANA: Countries in West Asia and North Africa (WANA) region do not have a fixed position vis-à-vis India.
• Delhi has vibrant economic and strategic ties with almost all regimes in the region.
• That’s precisely the reason these countries are unwilling to join the Islamabad-led chorus or go beyond passing resolutions.
• India’s signing of a free trade agreement (FTA) with the UAE and the ongoing negotiations for a wider FTA with the GCC could be an eye-opener for the country’s detractors.
• India’s energy needs: As much as 40 per cent of oil and an equal share of gas requirements are met through India’s strategic cooperation with the Gulf regimes.
• Mutuality of interests: India and the WANA regimes know that there is a mutuality of interests in these transactions which cannot be substituted by any other segments of the world system.
• Indian diaspora: Equally important is the role of the more than eight million-strong Indian diaspora in the WANA region.
• The “Gulf remittance” is an important part of the Indian economy, as important as the Indian investment in the GCC and GCC investment in India.

Way Forward

• India’s foreign policy strategy — which includes strategic bargaining with regional and international actors — would fetch reasonable dividends.
• The response to its Ukraine war strategy has convinced South Block that it has adequate manoeuvrability in global affairs.
• New Delhi should not stop engaging the countries, especially the ones in the WANA region, as both have shared interests. Therefore, South Block must go beyond a mere damage-control exercise.

Source – The Indian Express

India Is Not the Fastest Growing Big Economy

Context

The Provisional Estimates of Annual National Income in 2021-22 just released show that GDP grew 8.7% in real terms and 19.5% in nominal terms (including inflation). It makes India the fastest growing major economy in the world.

Relevance

GS-III: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Dimensions of the Article

• What Data Implies
• Issues with the Data
• Possible Corrections

What data Implies

• Just 1.51% larger: Provisional Estimates of Annual National Income in 2021-22 also indicate that, the real economy is 1.51% larger than it was in 2019-20, just before the novel coronavirus pandemic hit the world.
• In nominal terms it is higher by 17.9%.
• Inflation: These numbers imply that the rate of inflation was 10.8% in 2021-22 and 16.4% between the two years, 2019-20 and 2021-22.
• Almost no growth: This picture implies almost no growth and high inflation since the pre-pandemic year.
• So, the tag of the fastest growing economy means little.
• Quarterly growth rate: The quarter to quarter growth currently may give some indication of the present rate of growth.
• In 2020-21, the quarterly rate of growth increased through the year.
• In 2021-22, the rate of growth has been slowing down.
• Of course in 2020-21, the COVID-19 lockdown had a severe impact in Q1 (-23.8%); after that the rate of growth picked up.
• In 2021-22, the rate of growth in Q1 had to sharply rise (20.3%).
• Ignoring the outliers in Q1, growth rates in 2021-22 have sequentially petered out in subsequent quarters: 8.4%, 5.4% and 4.1%.
• Going forward, while the lockdown in China is over, the war-related impact is likely to persist since there is no end in sight.
• Thus, price rise and impact on production are likely to persist.

Issues with the Data

• The issue is about correctness of data.
• The annual estimates given now are provisional since complete data are not available for 2021-22.
• There is a greater problem with quarterly estimates since very limited data are available for estimating it.
• No data for Q1 of 2020-21: The first issue is that during 2020-21, due to the pandemic, full data could not be collected for Q1.
• No data for agriculture: Further, for agriculture, quarterly data assumes that the targets are achieved.
• Agriculture is a part of the unorganized sector.
• Very little data are available for it but for agriculture — neither for the quarter nor for the year.
• It is simply assumed that the limited data available for the organized sector can be used to act as a proxy.
• The non-agriculture unorganized sector is represented by the organized sector.
• Changes in non-agriculture unorganized: The method using the organized sector to proxy the unorganized non-agriculture sector may have been acceptable before demonetization (2016) but is not correct since then.
• The reason is that the unorganized non-agriculture sector suffered far more than the organized sector and more so during the waves of the pandemic.
• Shift in demand to the organized sector: Large parts of the unorganized non-agriculture sector have experienced a shift in demand to the organized sector since they produce similar things.
• This introduces large errors in GDP estimates since official agencies do not estimate this shift.
• All that is known is that the Micro, Small and Medium Enterprises (MSME) sector has faced closures and failures.
• If GDP data are incorrect, data on its components — private consumption and investment — must also be incorrect.
• Further, the ratios themselves would have been impacted by the shock of the lockdown and the decline of the unorganized sectors.
• Private consumption data is suspect since according to the data given by the Reserve Bank of India which largely captures the organized sector, consumer confidence throughout 2021-22 was way below its pre-pandemic level of 104 achieved in January 2020.
• In brief, neither the total nor the ratios are correct.

Possible Corrections

• In the best possible scenario,  assume that the organized sector (55% of GDP) and agriculture (14% of GDP) are growing at the official rate of growth of 8.2% and 3%, respectively.
• Then, they would contribute 4.93% to GDP growth.
• The non-agriculture unorganized component is declining for two reasons: first, the closure of units and the second the shift in demand to the organized sector.
• Even if 5% of the units have closed down this year and 5% of the demand has shifted to the organised sector, the unorganised sector would have declined by about 10%; the contribution of this component to GDP growth would be -3.1%.
• Clearly, recovery is incomplete and India is not the fastest growing big economy of the world.

Source – The Hindu