Economy This Week (24th Dec 2022 to 6th Jan 2023)

Economy is an important part of the UPSC prelims and mains exams; this series titled ‘Economy This Week’ has been initiated to address the need to read and analyse economic articles in various business-related newspapers. The round-up of the Economy/Business section news for 24th Dec 2022 to 6th Jan 2023 is given below. Business news is essential for IAS exam preparation.

TABLE OF CONTENTS

1. Centre clears ₹ 19744 Cr Green Hydrogen Mission (TH 5/1/23)
2. Lens on EV makers claim to FAME Subsidy (ET 1/1/23)
3. Guidelines for city rankings released (BL 29/12/22)
4. 81 Cr people to get free food grains for 1 year (TH 24/12/22)
5. India’s toy story is still in the making (TH 3/1/23)
6. India self-reliant in textiles, food products, iron and steel (ET 27/12/22)
7. Bad loans share at a decadal low (TH 2/1/23)
8. Govt’s USOF spends to remain below BE in FY23 (FE 26/12/22)
9. India to secure raw material to make fertilizers (LM 31/12/22)
10. FDI chasing services sector (TH 29/12/22)
11. MEITY notified as nodal ministry for online gaming (BS 28/12/22)
12. Govt unveils right to repair portal (IE 25/12/22)
13. Corporate tax to GDP ratio exceeds 3% (IE 2/1/23)

1. Centre clears ₹ 19744 Cr Green Hydrogen Mission (TH 5/1/23)

• The Union cabinet has approved ₹ 19744 Cr National Green Hydrogen Mission (NGHM). This is expected to make India a global hub to produce, utilize, export green hydrogen and its derivatives   
  • This is expected to reduce the greenhouse gas emissions by 50 million tonnes annually by 2030 
  • Reduce the fossil fuel imports by ₹ 1 lakh Cr 
  • This will also decarbonise the major sectors and make India energy independent 
  • This will add to green hydrogen production of at least 5 MMT per annum 
  • This is expected to bring in investments of ₹ 8 lakh Cr and create over 6 lakh jobs and also help India to meet international commitments  
  • This will also promote the Public Private Partnership (PPP) framework for research and development 
• The total outlay of ₹ 19744 Cr will comprise of 
  • ₹ 17490 Cr for Strategic Interventions for Green Hydrogen Transition Programme (SIGHT) 
    • Two distinct financial incentive mechanisms – targeting domestic manufacturers of electrolysers and production of green hydrogen 
  • ₹ 1466 Cr for pilot projects 
  • ₹ 400 Cr for research and development 
  • ₹ 388 Cr for other mission components 
• The ministry of New and Renewable Energy will be formulating scheme guidelines for implementation of respective components 

2. Lens on EV makers claim to FAME Subsidy (ET 1/1/23)

• Central govt has directed the testing agencies to relook at the eligibility certificates of EV manufacturers under Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME India)  
  • This is being done after the allegations over some of the manufacturers mislabelling imports as domestically manufactured and cornering the subsidies 
  • The International Centre for Automotive Technologies (ICAT) and Automotive Research Association of India (ARAI) have been asked to check whether the manufacturers are meeting localisation requirements 
  • These agencies will then be issuing fresh certificates 
• Under FAME, the EV makers can offer up to 40% on the cost of the vehicle and claim it as subsidy from the Ministry of Heavy Industries (MHI) 
• FAME-II is being implemented for a period of 5 years from 2019 with a budgetary support of ₹ 10000 Cr 

3. Guidelines for city rankings released (BL 29/12/22)

• Govt has released draft guidelines for a new ranking system of cities – City Finance Rankings 2022 – where they will be ranked on financial performance and beautification 
• It aims to evaluate, recognise, reward urban local bodies (ULBs) on the basis of their strength across their financial parameters including resource mobilization, expenditure performance and fiscal governance systems 
• The ULBs will be evaluated on 15 indicators and will be ranked at national level under any one of the existing four population categories 
  • Less than 1 lakh 
  • 1 lakh to 10 lakh 
  • Between 1 to 4 mn 
  • Above 4 mn 
• The rankings will 
  • Help the ULBs identify the areas in their financial performance where there is a need to make further improvement, deliver quality infrastructure and services to its citizens 
  • Highlight the outcomes achieved by ULBs and provide critical insights to key policy makers

4. 81 Cr people to get free food grains for 1 year (TH 24/12/22)

• Union cabinet has decided to provide free food grains to all 81 Cr beneficiaries under the National Food Security Act (NFSA) for one year
  • The beneficiaries until now were to pay ₹ 3, ₹ 2 and ₹ 1 for rice, wheat and coarse grains respectively. It will now be made free of cost   
• This will mean 81.35 Cr beneficiaries will get free food grains and the entire cost will be borne by the government

5. India’s toy story is still in the making (TH 3/1/23)

• India imported about 80% of the requirement of toys and the government has been promoting the domestic manufacturing 
• In 2022 the exports have surged from ₹ 300 – ₹ 400 Cr to ₹ 2600 Cr and the imports have fallen by over 70% from over ₹ 3000 Cr 
  • One of the reasons was the rise in customs duties on toys from 20% to 60% and stringent quality checks were imposed on toy imports 
  • China is a major source of imports of toys for India. However the imports have halved from $300 mn to $150 mn in recent years 
• The overall sales of toys increased from $119 bn in 2020 to $158 bn in 2021 
  • Majority of this was because of USA where the sales increased from $36 bn to $52 bn during the same period and majority of the demand was fulfilled because of exports from China 
  • China has remained the major exporter of toys. It’s exports have increased from $71 bn to $101 bn in 2021 
• Though India wants to phase out imports from China, it will have negligible impact on China as India accounts for just 0.7% of China’s exports 

6. India self-reliant in textiles, food products, iron and steel (ET 27/12/22)

• As per the report published by Confederation of Indian Industry (CII) and PriceWaterhouseCoopers (PwC) 
  • India has achieved self-reliance in textiles and clothing, food products, iron and steel, and transport 
  • It continues to lag in machinery, electronics, plastics etc 
• CII and PwC have prepared Atma Nirbhar Index (AI) – expressed as ratio of total exports and imports 
  • If the index value is greater than one, it means India is self-reliant and lower than one means it is not self-reliant 
    • For FY22, the index has a ratio of 0.69
    • The index has classified India into 20 sectors – textiles, aluminium, electronics, food products etc  
    • 8 out of 20 sectors had an index reading of greater or equal to 1. Not only this, the exports in these sectors were greater than imports in 2016-17 as well-meaning trade surplus has increased for six of these eight sectors in the last five years 
    • 12 sectors had AI of lower than 1. However it is important to note that many of these sectors are exhibiting steady progress towards atma nirbharata 
      • Some sectors such as electronics, diamonds, machineries, minerals etc have also shown contraction in imports 

7. Bad loans share at a decadal low (TH 2/1/23)

• As per the latest RBI data
  • The Gross Non Performing Assets (GNPA) ratio of Scheduled Commercial Banks (SCB) has fallen to seven year low 
    • GNPA ratio is the ratio of gross non-performing assets to gross loans and advances 
  • The net NPA – NNPA (GNPA minus the provisions made by the banks out of the profits) ratio was at ten year low 
    • NNPA is a better indicator as the high provisioning means the banks will have less to lend 
• The decline in both GNPA and NNPA show that the issue of NPA is not troubling the banks as it used to earlier 
• Reasons for the decline 
  • The slippage ratio has declined to 2%, lowest since 2015 
  • Write offs by the banks have increased. In the first half of FY23 the banks have written off 22.6% of the GNPAs 
• The return on assets – RoA (net profits by average total assets) – of all SCBs had entered into a negative territory in September 2019 and by September 2022 it was back to 0.8% (the levels was last seen in 2014-15)

8. Govt’s USOF spends to remain below BE in FY23 (FE 26/12/22)

• For the 6th consecutive fiscal, the actual expenditure of the govt under Universal Service Obligation Fund (USOF) will be falling short of the budget estimate 
  • The latter is at ₹ 9000 Cr and the former would be ₹ 5500 Cr for the current fiscal 
  • For the previous fiscal the actual expenditure was ₹ 8300 (BE was ₹ 9000 Cr) and this was increased by 8% for the current fiscal  
• As of October 31, the govt has spent only ₹ 1213 Cr and the balance in the USOF is at ₹ 64774 Cr 
• The underspending trend underlines the demand of the telecom operators to reduce the contribution to the USOF from 5% to 3% of AGR 
• The funds under the USOF will be used for providing connectivity to the villages 
• As per the govt, involvement of multiple agencies and slow progress by implementing agencies are some of the reasons for the delayed implementation of BharatNet project 
• As of end of October, ₹ 36502 Cr has been released by the govt from USOF 
• The scope of the USOF has been extended to cover the R&D projects for the telecom sector as a part of Telecom Technology Development Fund (TTDF) 

9. India to secure raw material to make fertilizers (LM 31/12/22)

• India will be signing the agreement with Morocco and Egypt to secure long term supply of rock phosphate (needed to make DAP) and NPK 
  • India may also set up plants in these countries for DAP and NPK production for imports 
  • As per the proposal, the public and private companies through a joint venture will mine, produce and bring the fertiliser to India 
  • Morocco has huge reserves of phosphorus 
• The fertilizer subsidy bill for the current fiscal has gone up to ₹ 2.15 lakh Cr so far  
• Total requirement of fertilizers in India is 43.5 mt 
  • India is totally dependent on imports of muriate of potash 
  • In terms of DAP, Urea and NPK fertilisers India imports 60%, 25% and 15% of imports respectively 
  • India used to import the DAP from China, but now China itself is importing it forcing India to import it from other sources 
• India earlier this year has signed the MoUs (Memorandum of Understanding) with countries such as Israel, Oman, Senegal etc in this regard 

10. FDI chasing services sector (TH 29/12/22)

• India Ratings and Research has found that 
  • The foreign investors still favour investing in services sector though govt has been pushing the Make in India initiative 
    • FDI in manufacturing between 2014 to 2022 increased $77 bn to $94 bn. Whereas in case of services sector it has increased from $80 bn to $153 bn 
    • Within the services sector, trading, telecom, IT/BPO etc were the favourites 
  • Large chunk of the foreign investment is not in the greenfield projects   
  • Causes 
    • Doing business in the services sector is less complicated compared to doing business in the manufacturing sector 

11. MEITY notified as nodal ministry for online gaming (BS 28/12/22)

• Ministry of Electronics and Information Technology (MEITY) has been notified as the nodal ministry for matters related to online gaming 
• The ministry of Youth Affairs and Sports (MYAS) has been tasked with regulating esports 
• The ministry is likely to announce a policy in next two to three weeks 
  • The policy is likely to announce a mandatory age verification mechanism and Know Your Customer (KYC) norms for all real money games 
  • The ministry is also likely to prescribe a self-regulatory organization (SRO) for the industry 
• Earlier the govt in may had set up an inter-ministerial task force to work on regulations and also find the appropriate nodal ministry 

12. Govt unveils right to repair portal (IE 25/12/22)

• Govt has launched the right to repair portal 
• On the portal the manufacturers will be sharing the manual of the product details with the customers so that the customers can repair the product by themselves or take it to a third party. This will automatically reduce the dependence on the original manufacturers 
• Initially under this mobile phones, consumer durables, automobile and farming equipment will be covered 

13. Corporate tax to GDP ratio exceeds 3% (IE 2/1/23)

• The corporate tax to GDP ratio for FY22 has crossed 3% after a gap of two years  
  • It had fallen to 2.77% in FY20 after govt reduced the tax rate to 22% 
  • The highest in last 5 years was recorded in FY19 of 3.5% (actual tax collection was ₹ 6.63 lakh Cr) 
  • The actual collections stood at ₹ 7.12 lakh Cr and GDP at ₹ 236.64 lakh Cr  

Economy This Week (24th Dec 2022 to 6th Jan 2023):- Download PPT Here

ETW (24th Dec 2022 to 6th Jan 2023):- Download PDF Here