15 Mar 2023: UPSC Exam Comprehensive News Analysis

B. GS 2 Related

Nothing here for today!!!

E. Editorials

Category: INDIAN ECONOMY

1. A case for a better electricity public hearing

Syllabus: GS-3, Energy.

Mains: Public hearings for electricity.

Details:

• The annual revenue requirement of electricity distribution companies is 20% of the Union Budget.
• The decisions on planning and operation of power have a considerable impact on the public. Therefore, citizens should be incorporated into the decision-making.
• Electricity Regulatory Commissions (ERCs) provide a platform for public hearings. During the COVID-19 pandemic, a new trend of online hearings emerged.
• The Central ERC has issued a public notice to resume in-person hearings. Some states like Telangana and Tamil Nadu have already started in-person hearings whereas others like Rajasthan and Uttar Pradesh conduct it in an online mode.

In-person vs Online hearings:

• Pros of in-person hearings:
  • The most popular and important public hearing is about tariff revision. In an in-person hearing, there is a benefit of meaningful interaction and cross-learning between various stakeholders.
  • In-person hearing also helps in building consumer networks and ensures collective action.
  • Moreover, the process facilitates consensus-building and enhances the credibility of decisions on complex matters.
  • In-person public engagements have helped in understanding issues of distribution losses due to high agriculture consumption and the need for scrutiny in power purchase contracts.
  • Discussion on the quality of supply and corrective measures also takes place. 
  • In order to diversify public participation, states like Maharashtra and Andhra Pradesh organize hearings at different locations.
  • States like Odisha and Andhra Pradesh have taken other innovative measures like providing a summary of tariff petitions in local languages and facilitating consumer advocate services.
• Issues with in-person hearing:
  • Distance and logistics of transport can hinder large participation.
  • There is also the issue of a lack of financial support.
• Pros of online hearings:
  • They overcome transport and logistics issues and ensure wider participation from remote locations.
  • They also allow quick convening and multiple meetings aiding the consultative process.
  • In order to ensure smoother participation, ERCs provide guidelines and orientation sessions.
  • Maharashtra and Andhra Pradesh have established facilitation centres.
  • Live-streaming feature improves accessibility, visibility, and transparency.
• Issues with online mode:
  • Technological awareness and accessibility are major concerns.
  • ERC has greater control over the platform in online meetings.
  • There are also issues of poor internet connectivity, technical mishaps, and complex process.

Hybrid Model of Public Hearings:

• As both approaches have their own set of advantages and disadvantages, adopting a hybrid model would strengthen public participation.
• Other institutions like the National Green Tribunal has adopted e-hearing facility in addition to the in-person process.
• A hybrid approach will also increase accessibility and plug the gaps between each other.
• It will also provide flexibility of participation to citizens.

Also read: Integrated Power Development Scheme

Nut Graf: The public hearing in the power sector is crucial to ensure transparent decision-making and operations. The two approaches to public hearings (in-person and online) have both advantages and disadvantages and thus a hybrid approach should be adopted to boost public participation.

2. What are India’s immediate growth prospects?

Syllabus: GS-3, Indian Economy and issues related to planning.

Mains: Status of Indian Economy.

Context: The National Statistical Office (NSO) released annual and quarterly national income for 2020-21, 2021-22, and 2022-23 on 28th February 2023.

Details:

• Annual and quarterly national income for 2020-21, 2021-22, and 2022-23 were released by the National Statistical Office (NSO).
• This would help in the final assessment of the impact of the COVID-19 pandemic on India’s GDP growth.

Also read: National Income and its Accounting

Statistical Details:

• The second advance estimate (SAE) of NSO highlights that India suffered a contraction of (-) 5.7% in 2020-21. This is lower than its first advance estimate (FAE) at (-) 7.7%.
• The real GDP in the COVID-19 year was approximately ₹136.9 lakh crore. It is higher than the earlier assessment of ₹134.4 lakh crore.
• The GDP increased by 9.1% in 2021-22 and 7% in 2022-23. The compound annual average growth rate between 2019-20 and 2022-23 was 3.2%.
• The overall GVA (sector-wise) is higher by 11.3% in 2022-23. However, the mining and quarrying sector still shows a contraction of (-) 0.3%.
• Moreover, trade, transport, hotels, etc. display a weak growth of 4.3%.
• Sectors with higher than average increase are construction (18.6%), manufacturing (14.8%), and agriculture (12%).
• In terms of aggregate expenditure, the overall rise in real GDP is 10% with government final consumption expenditure (GFCE) growing at 7.4%.
• Gross fixed capital formation rose by 17.7% and private final consumption expenditure (PFCE) increased by 13.1%.
• The gross fixed capital formation to GDP ratio in nominal terms (in 2022-23) is 29.2%. The real investment rate is 34%.
• The estimated incremental capital output ratio (ICOR) in 2019-20 was 8.5 whereas in 2022-23 it was 4.9. This can be attributed to the lower GDP growth rate in 2019-20 (3.7%) reflecting unutilized capacity.
• The average capacity utilization ratio in the manufacturing sector was 70.3% in 2019-20.  In the first half of 2022-23, it stood at 73.5%.
• Despite an improvement in the gross fixed capital formation rate, the subdued growth implies a lower capacity utilization and a higher ICOR.
• The PMI in January and February 2023 were 55.4 and 55.3, respectively. This is above its long-term average of 53.7.
• Core Index of Industrial Production showed a growth of 7.8% in January 2023. It was 7% in December 2022. 
• Credit growth stood at 16.1% on 10 February 2023. However, the industrial credit growth was at a seven-month low. 
• In the third quarter of 2022-23, the manufacturing sector showed a contraction at (-) 1.1% while public administration, defence, etc. showed a weak growth at 2%.
• The contribution of net exports to real GDP growth in Q3 of 2022-23 was (-) 0.2% points.
• The data thus shows that the growth is yet to pick up at the desired level.

Implications for Growth:

• The Reserve Bank of India (RBI) and the International Monetary Fund (IMF) have projected India’s growth in 2023-24 at 6.4% and 6.1% respectively.
• It will likely remain lower than the growth rate of its preceding year of 7% due to the global economic slowdown.
• If the fiscal stimulus is continued and injected through capital expenditure, India might achieve RBI’s growth estimate.
• Moreover, any stimulus for growth should be undertaken while aligning with the fiscal consolidation roadmap. This would keep India’s medium-term story intact.
• In order to ensure steady growth of 6% to 7% over the medium term, the fixed capital formation rate should be increased by another 2 percentage points.

Also read: Economic Recovery Post-Pandemic

Nut Graf: The National Statistical Office data has helped in better assessing the impact of COVID-19. Though India’s growth has increased, it has not yet reached the desired level due to multiple factors, including the global economic slowdown.

Category: INTERNATIONAL RELATIONS

1. Saudi-Iranian ‘normalisation’, challenges in West Asia

Syllabus: GS-2, Bilateral agreements affecting India’s interest.

Mains: Saudi Arabia-Iran relations.

Context: Saudi Arabia and Iran signed an agreement in Beijing, China to re-establish their diplomatic ties.

Details:

• Saudi Arabia and Iran signed an agreement (on 10th March 2023) in Beijing, China, to re-establish diplomatic ties, respect each other’s sovereignty, and maintain non-interference in the other’s domestic affairs.
• Moreover, two accords on security cooperation (2001) and another dealing with economic, technical, scientific, and cultural ties (1998) were also re-instated.
• There was a diplomatic estrangement between the two countries for seven years. They confronted each other in proxy wars in Syria and Yemen, carried out media campaigns against each other, and engaged in a direct conflict in 2019 (suspected Iranian agents attacked Saudi oil facilities).
• The Chinese Foreign Affairs Minister has brokered the agreement. The agreement is welcomed by West Asia.

Also read: Iran-Saudi-China Accord A Wake-up Call For India?

Background Details:

• The issues between the two countries included the wars in Syria and Yemen and Saudi’s concern about Iran’s mobilization of Shia communities in the region against the Arab states.
• The agreement reflects that Arab countries are prepared to pursue their interests without the involvement of the U.S.
• There is increasing regional disenchantment with the U.S. as a security provider. The U.S.’s military failures in Iraq and Afghanistan have resulted in the loss of credibility among its regional allies.
• The regional states are trying to broaden their options and build alternative relationships and thus China appears to be an attractive partner for them.
• The Saudi-Iran accord tries to reduce regional tensions and puts in place the bases for further dialogue on improving relations.

China’s relation with West Asia:

• China has energy, trade, investment, and technology-related ties with West Asia.
• It is the largest buyer of crude oil from the region.
• West Asia is also crucial for China’s Belt and Road Initiative (BRI) as the countries in the region provide logistical connectivity, investment, consultancy, and contracting partnerships.
• About two years ago, China started looking for greater political involvement in the region to expand commercial, diplomatic, and political relations instead of its hard security concerns.
• China is managing differences in the region through diplomacy and the Saudi-Iran accord is the first manifestation of this new approach.

Associated Concerns:

• The differences between the two countries are still difficult to resolve as Saudi Arabia is concerned about strategic vulnerability vis-à-vis its northern neighbour.
• Moreover, there are concerns about destabilization through the use of Shia proxies in the region. Thus, Iran will have to play a proactive role to address these issues.
• Regional security also requires the revival of the nuclear agreement, the Joint Comprehensive Plan of Action (JCPOA), as IAEA observed uranium enrichment by Iran up to 84% (near weapon grade).
• Furthermore, Israel’s aggressiveness also needs to be managed. It is suggested that Israel’s domestic politics might obstruct the renewal of the JCPOA and maintain a hostile posture towards Iran.
• China’s increased and more active role in West Asia is a cause of concern for India. 
  • It is recommended that India should engage with China in West Asia as they have shared interests in fields of energy security, free and open sea lanes, connectivity, and regional stability.

Also read: Look West Policy

Nut Graf: The agreement between Saudi Arabia and Iran to re-establish bilateral ties is welcomed by West Asia. However, there are certain challenges in the region. China and India can work together to advance their mutual and regional interests.