DAILY NEWS ANALYSIS 2nd FEBRUARY 2022

1. What the Survey Says

The Economic Survey of 2021-22 has analysed aspects such as inflation, global liquidity measures, and rising energy prices to detail the risks for the economy going ahead.

Fiscal space:

• The Survey notes that buoyant tax revenues and government policies have allowed for additional fiscal policy interventions.
• Government is on course to achieve the fiscal deficit target of 6.8% of GDP for the current year.
• Banking sector is well placed to support the economy, as it is now “well capitalised and NPA seems to have structurally declined”.
• Revenue receipts of the Centre during April-November 2021 have gone up by 67.2%.

Vaccine economics:

• Private consumption will see stronger recovery with rapid coverage in vaccination and faster normalisation of economic activity.
• While India’s CPI inflation — 5.2% in 2021-22 (April-December) — is within the targeted tolerance band, WPI inflation has been running in double digits. This is partly due to base effects.

Global uncertainty:

• While foreign exchange reserves — $633.6bn makes India’s external sector resilient for the withdrawal of liquidity measures, the Survey points out that the overall balance of risks for global trade is tilted to the downside.
• The biggest downside risk comes from the pandemic, along with longer port delays, higher freight rates, and the shortage of shipping containers and inputs such as semiconductors.

Energy risks:

• It calls for a “diversified mix of sources of energy” of fossil fuels along with focus on building storage for intermittent electricity generation from solar PV and wind farms to ensure on-demand energy supply. Need to encourage R&D.

Supply side reforms:

• It calls for emphasis on developing a supply-side strategy for long term stability- need for changes in consumer behaviour, technological developments, geopolitics, climate change, and their potentially unpredictable interactions.

Industrial growth:

• It will reflect a growth of 11.8% in 2021-22 due to measures like PLA, Emergency credit linked growth etc.

Public spending:

• During April-November 2021, capital expenditure grew by 13.5% (YoY), with focus in infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs.

The government’s strategy has been to not pre-commit to a “rigid response” while using safety nets for vulnerable sections, and responding iteratively based on Bayesian-updating of information.

Areas ambivalent in survey:

• The survey claims a growth of 8-8.5% of Indian economy which is conservative in comparison to projections of IMF and WB.
• It does not examine the uneven nature of growth of different sectors.
• The stress in labour market, rise in inequality, financial issues of MSME’s need to be studied exhaustively.
• While focusing on supply side reforms, it has not focused on demand management.

2. Why UNSC Joint Statement on Nuclear Weapon is Important?

P5 has agreed to:

1. work with all states to create a security environment more conducive to progress on disarmament.
2. continue seeking bilateral and multilateral diplomatic approaches to avoid military confrontations.
3. pursue constructive dialogue with mutual respect of each other’s security interests.

It is not a binding resolution and reiterates some of the core obligations of the NPT.

Why?

• A “nuclear war cannot be won and must never be fought” because of its “far-reaching consequences”.
• Nuclear threats can render meaningless bilateral and multilateral non-proliferation, disarmament, and arms control agreements and commitments.
• Growing spectre of loose nukes may be deployed by armed terrorist groups for nefarious purposes.

Way forward:

• Need to review NPT at the earliest which remains postponed due to the Covid-19 pandemic.
• Focus on peace education is required at multiple levels, ranging across the planetary, global, supranational, regional, national, and local levels of social cognition and action.

NPT:

• The NPT is a multilateral treaty aimed at limiting the spread of nuclear weapons including three elements: (1) non-proliferation, (2) disarmament, and (3) peaceful use of nuclear energy. These elements constitute a “grand bargain” between the five nuclear weapon states and the non-nuclear weapon states.
• The treaty was signed in 1968 and entered into force in 1970. Presently, it has 190 member states.

Provisions:

• The Treaty defines nuclear weapon states (NWS) as those that had manufactured and detonated a nuclear explosive device prior to 1 January 1967. All the other states are therefore considered non-nuclear weapon states (NNWS).
• The five nuclear weapon states are China, France, Russia, the United Kingdom, and the United States.
• The Treaty does not affect the right of state parties to develop, produce, and use nuclear energy for peaceful purposes.

Implications:

• States without nuclear weapons will not acquire them.
• States with nuclear weapons will pursue disarmament.
• All states can access nuclear technology for peaceful purposes, under safeguards.

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