Trump is Right (No Pun Here)

I am with Donald Trump on the Ukraine issue.

The West cannot win this war. Europe is an ailing military power. The EU is high on rabble and low on military power, not withstanding the exalted claims of the UK, France (both nuke powers), and Germany. The Ukraine conflict has laid bare the military vulnerability of the EU: no large arsenals and certainly none of the much-vaunted tide-turning cutting edge technology on display.

The EU, especially the larger economies of the UK, France, and Germany, in an economic shithole. They are nothing more than glorified Middle Powers, like Iran, albeit with better technology and clout. But that's about it.

The EU cannot win the war in Ukraine against the Russians. Putin may be alone, but he sure weighs heavily on the minds of the liberal establishments in most of the EU nations.

The biggest threat the world faces, which the Russophobic-EU ignores, is the rise of a militaristic China.

China represents the single biggest threat to the U.S., India, the EU, and most of the southeast Asian nations.

If the U.S. gets out of the Ukraine quagmire, it can focus on countering China, which today is hellbent on owning not just the South China Sea but the Pacific Ocean as well.

Compared with the military threat from China, Russia is small change. The sooner the Russophobic-West, especially the EU, realizes this uncomfortable truth, the better will the chances of the anti-China brigade, including the U.S. and India, in countering the rising dangers of an aggressive and militaristic China.

The Explainer - The Citizenship Amendment Act

 The Citizenship Amendment Act will be implemented before the Lok Sabha elections take place in May this year.

 Ever since it was brought out in 2019, the CAA has become a become a rallying point for the BJP's detractors across the political and non-political spectrum. 

The liberal cabal, also called the ‘secular brigade’, has accused the Modi Government of seeking to disenfranchise the Indian Muslims through the CAA. 

 Is this accusation true?

Highlights of the CAA

I have compiled the most important provisions of the Citizenship Amendment Act, 2019, which is an act further to amend the Citizenship Act, 1955. 

• Persons belonging to the religious minorities of Hinduism (Hindu), Jainism (Jain), Sikhism (Sikh), Buddhism (Buddhist), Zoroastrianism (Parsi), and Christianity (Christian) in the Islamic nations of Afghanistan, Pakistan, and Bangladesh and who entered India on or before 31 December 2014 will not be treated as illegal migrants.
  
  
• Such persons shall be deemed to be citizens of India from the date of their entry into India.
   
• Under the Citizenship Act, 1955, the most important requirement for citizenship by naturalization is that the applicant must have resided in India during the last 12 months, and for 11 years of the previous 14 years. The CAA relaxes this 11-year requirement to six years for persons belonging to the above-mentioned religions and the three countries.

As you see, there is nothing anti-Muslim here. Also, it has nothing to do with Indian citizens.

A Muslim from any country, including from Afghanistan, Pakistan, and Bangladesh, can apply for Indian citizenship. However, she will have to come through the normal process, and not through the expedited process that will be available to non-Muslims from these countries.

The three countries of Afghanistan, Bangladesh, and Pakistan have been explicitly mentioned because they are avowedly Muslim, with Islam as the state religion. It is an open secret that the persons from the religious minorities (Hindu, Christian, Jain, Buddhist, and Parsi) are greatly discriminated against, persecuted in every way possible, and denied basic freedoms.

In these three Islamic nations, forced conversions to Islam are an ugly fact of life while blasphemy laws are routinely used to harass and intimidate religious minorities in these countries.

At the time the CAA was passed, the BJP has been greatly lacking in ‘communication’. The party has several effective public speakers, yet they failed miserably in communicating to the Indian public, especially Muslims, that the CAA has nothing to do with Indian citizens.

This time around, the BJP has mounted an aggressive campaign to drive home the precise point that Indian Muslims have nothing to fear from the CAA. 

Eco Basics: Dangerous Effects of High Fiscal Deficit

This post will focus on the negative consequences of a high Fiscal Deficit.

Before that, let me address a pertinent question: Where does the Government of India borrow from?

The three major sources of borrowing for the Government of India are (a) RBI, (b) foreign lenders (sovereign governments and international organizations like IMF and World Bank), and (c) from the general public of our country.

Contrary to popular perception, the Government of India borrows most from the general public, through the issue of bonds (pretty much like fixed deposits).

What are the adverse consequences of Fiscal Deficit?

A high Fiscal Deficit is bad for the general state of the economy, foreign trade balance, and currency exchange rate.

Rising Interest Rates

A high Fiscal Deficit means the Government of India’s (GOI, or just government) borrowings are high. When the government borrows money from the general public, it creates demand for money. 

Lending to government carries zero risk, as the government would not default on repayment (it has not defaulted till date!). However, greater government borrowing would mean less money is available for lending to industrial and other sectors of the economy. This would push up interest rates for the borrowers from the industry and other sectors of the economy.

Reduced Business & Economic Activity

Higher interest rates would add to overall cost of production, thereby increasing the cost of operations. This in turn would render business activity, like increased production and expanding operations, unviable. Hence, a lot of businesspersons would opt out of such economic activity as they no longer find it profitable.

Reduced Income & Employment Generation

If due to higher interest rates businesspersons opt out of economic activity (or close down plants), it would lead to reduction in employment generation. This would in turn mean that the retrenched (those thrown out of jobs) and the unemployed do not earn income, thus reducing their purchasing power.

If purchasing power goes down, then their aggregate demand for goods and services would also go down. This in turn would also reduce industrial activity, thereby depressing overall economic scenario.

Lowers Exchange Rate & Increases Trade Deficit

Sometimes the government of India would borrow from foreign sources. When the government is lent money, foreign exchange comes into the economy. This would increase the supply of the foreign currency, which in turn would be exchanged for the Indian rupee.

The rise in demand for the Indian currency would increase its value. Simply put, as foreign entities begin to exchange their currency for Indian rupee, the value of the Indian rupee will also increase.

For example, the exchange value of the Indian rupee for each U.S. dollar is ₹72. In this scenario, let’s say, when a foreign entity is exchanging its currency for Indian rupee in large volumes, the exchange value may fall to ₹70 per U.S. dollar.

This means that while earlier one U.S. dollar would have fetched ₹72, now it would fetch only ₹70. This would hurt exports and encourage imports. 

How?

As an importer, in the past, you were paying ₹72 per U.S dollar of import while now you are paying only ₹70. This means that your cost of operations would also fall.

However, if you are an exporter, then this would mean that you would earn less from your exports; like earlier you were earning ₹72 for every U.S. dollar of export, it is only ₹70!

If exports go down and imports go up, the country's trade deficit would rise. 

Also, high borrowings now would mean that the country's financial position becomes precarious as it piles higher debt and interest burden on future generations. 

In short, a high Fiscal Deficit is dangerous in every way possible: for general economic activity, employment generation, exchange rate, and trade balance.

Eco Basics: Understanding Fiscal Deficit

 

Today's article focuses on Fiscal Deficit.

What types of receipts are non-debt creating?

Revenue Receipts, Recoveries of Loans, and Other Receipts are all non-debt creating. This means that the government does not have to borrow to generate these sources of income.

Now, look at the accompanying table: Fiscal Deficit is numbered 22, Revenue Receipts is 1, Recoveries of Loans is 5 and Other Receipts is numbered 6.

Hence,

(22) Fiscal Deficit = (16) Total Expenditure – [(1) Revenue receipts + (5) Recoveries of loans + (6) Other Receipts]

Revenue Receipts would include both tax and non-tax revenue of the Government of India (GoI).

What is tax revenue? 

This refers to revenue that the GoI gets by way of collecting taxes, like Personal Income Tax, Corporate Tax (charged on incomes of companies), Central Sales Tax and Service Tax.

What is Non-tax revenue? 

This would include Stamp Duty and Dividends earned from Public Sector Units (PSUs). Dividend is the return on capital invested by the government in PSUs.

Sometimes the Government of India receives money that it would have lent to some country/organization in the past. When such money is received, it is recorded under the ‘Recoveries of Loans’ head.

When does Fiscal Deficit arise?

Fiscal Deficit arises when the government has expenditure higher than the revenue it generates. To bridge this expenditure-revenue deficit, the government resorts to borrowing. This borrowing is called Fiscal Deficit.

In short, fiscal Deficit is the total borrowing of the Government of India to fund the allocations and expenditures listed in the Union Budget.

In the table above, the Budget Estimate for Fiscal Deficit for 2020-21 (total borrowing) was projected at Rs7,96,337 crore. But the economic ravage brought about by the Covid pandemic destroyed major sources of tax and non-tax revenues. 

The shortfall in Gross Tax Revenue (includes GST, Income Tax, Corporation Tax and other taxes) was Rs5,22,740 crore. The projected figure for Gross Tax Revenue in 2020-21 was Rs24,23,020 crore, but the Central Government could collect only Rs19,00,280 crore. 

So, the Revised Estimates for 2020–21 show a Fiscal Deficit of Rs18,48,655 crore. In other words, what this figure means is that the Government of India is borrowing this huge amount of money in 2020-21! Yes, you got it right: a total borrowing of mind-numbing Rs18.48 lakh crore in one year!

Fiscal Deficit is usually expressed in terms of percentage of the country’s Gross Domestic Product (GDP).

Now, go to the bottom of the table. It is mentioned that India’s GDP in 2020-21 will be Rs194,81,975 crore (Rs194.8 lakh crore).

Taking India’s GDP to be Rs194,81,975 crore in 2020-21, the Fiscal Deficit of Rs18,48,655 crore works out to 9.5% of GDP.

So, to say that we are living way beyond our means would be an understatement. However, given the Covid pandemic-induced shutdown there was little elbow room for the Central Government to raise revenue and hence, it had to resort to very heavy borrowings to fund its welfare schemes. like providing free food grains and direct cash transfer to millions of heavily impacted vulnerable sections of the society. 

In the next post, I will write on how a high Fiscal Deficit could spell doom for the economic growth of the country. 

Eco Basics: What is the Economic Survey?

In India, there is hardly any economic event that captures popular imagination as much as the Union Budget. In this Budget series, The Explainer will focus on the complex budget jargon that puts off even 'interested-in-budget' souls.

What is a Fiscal Year?

Any twelve-month period that is used for submission of accounts, taxation purposes and to state financial reporting by private and public sector companies is called a Fiscal Year.

In India, the Government has laid down the provision that the 12–month starting on April 1 and ending on March 31 of next year will be treated as a Fiscal Year.

To put it in perspective, this article is being written on 31 January 2021, i.e., in Financial Year 2020–21 (FY21). This is also called Fiscal Year ’21.

In the same way, the financial year for 2021–22 will start on 1 April 2021 and will end on 31 March 2022. So on 1 April 2021, we will enter Fiscal Year ’22. 

What is the Economic Survey?

The Finance Minister's Budget Speech contains two major components: Part A and Part B.

Part A of the Speech contains the Economic Survey while Part B comprises the Union Budget Speech.

The Economic Survey is an assessment of the performance of the Indian economy in the financial year going by. For example, the Economic Survey 2020–21 presents an assessment of the performance of the Indian economy in that financial year (i.e., 2020–21). 

The Economic Survey 2020–21 was tabled on 29 January 2020. You can access it here.

What is the Budget?

The Union Budget is a statement of revenues and expenditures for the coming financial year, i.e., the one that starts on April 1 of this year.

Why is the Union Budget presented in February?

The Finance Minister of India presented the annual Union Budget for 2021–22 in the Parliament of India on February 1. It is typically presented in February (and not in March) for the following reasons: 

(a) After its presentation, the Budget is tabled in the Parliament so that MPs can, over the next few days, discuss and debate the various provisions listed in the Budget. 

(b) After the parliamentary debate, any amendment to the original provision (like increasing or decreasing the allocation for a said ministry/program and rolling back any budget proposal) will have to be tabled, discussed, passed, and brought into law by the Parliament. 

(c) Also, the administrative system, especially in case of tax administration, would need to be geared up to reflect any change in the financial, taxation or any other system.

I hope this is good! Please leave feedback in the comments section.

Indian Economy's Vital Stats Infographic

 

Here's a snapshot of the Indian Economy's Vital Statistics.

A Basic Understanding of NRC and the Assam Accord

A month back I wrote an article on the Citizenship Amendment Act. Today's article is on the NRC and the Assam Accord

What is the National Register of Citizens (NRC)
The National Register of Citizens (NRC) has become another political football. The BJP’s decades-old stand on the NRC has remained the same. From the party’s manifesto in the 1996 general election to the 2019 general election, the BJP has remained firm on completing an NRC to curb illegal migration into India, especially in the north-eastern states from Bangladesh.

In the 1996 manifesto, the party articulated three Ds: detection, deletion, and deportation – detection of illegal immigrants, deletion of their names from the electoral rolls, and deportation to the country of their origin.

In the 2019 manifesto, the party declared that: “There has been a huge change in the cultural and linguistic identity of some areas due to illegal immigration, resulting in an adverse impact on local people’s livelihood and employment. We will complete the National Register of Citizens process in these areas on priority. In future we will implement the NRC in a phased manner in other parts of the country. We will continue to undertake effective steps to prevent illegal immigration in the north-eastern states. For this we will further strengthen our border security.”

What is the Assam Accord?

The reader must note that the NRC idea is not the BJP’s baby. The NRC idea, first proposed in 1951, took root in the 1970s when the All Assam Students Union (AASU) launched a mass movement after its scrutiny of the local electoral rolls revealed names of a large number of illegal Bangladeshis. The AASU protested vehemently with its ‘Ds’ demand: detection, deletion, and deportation – detection of illegal immigrants, deletion of their names from the electoral rolls, and deportation to Bangladesh. The protest gained popular traction as it touched a raw nerve of the locals: they had been impacted adversely, especially demographically and economically, by the presence of illegal Bangladeshis.

However, it was only in August 1985 when the Rajiv Gandhi-led Congress Government and the AASU signed the Assam Accord. The central feature of the Assam Accord were the 3 Ds: detection, deletion, and deportation – detection of illegal immigrants, deletion of their names from the electoral rolls, and deportation to Bangladesh.

Under the Assam Accord, the Citizenship Act was amended to include clause 6A that provided for the classification of immigrants in Assam: 

• those who came before 1966 (including Hindu refugees who fled East Pakistan during the 1965 war); 
• those who came between 1966 and 24 March 1971 (when war with Pakistan officially commenced); and 
• those who came after 25 March 1971 (war refugees and later illegal immigrants). 

Citizenship was to be given to all those who migrated before 1966 from east Bengal and east Pakistan. Those who came between 1966 and 1971 were to be disenfranchised and granted citizenship after due process. Those who came after 24 March 1971 were to be detected and deported.

Subsequent governments at both the Centre and in Assam failed to complete the NRC. Fed up with the indifferent attitude of the state government, the AASU knocked on the doors of the Supreme Court, which ruled that the NRC, promised under the Assam Accord, must be completed under its supervision.

Now, it is clear that the NRC in Assam was (i) a provision of the Assam Accord, to which the Congress was a party; (ii) held in the state after the Supreme Court of India called for its implementation and (iii) the central government has had no role in its completion.

The draft NRC in Assam registered 2,89,83,677 out of the state’s 3.3 crore population (census-based). The rest were left out; in other words, they could be classified as ‘illegal immigrants’. It is here that the Bangladesh Government comes in; in case, Bangladesh refuses to acknowledge these four million as its own citizens, they run the risk of being labelled ‘stateless’.

For now, the BJP’s flip-flop has only muddled the NRC debate. Things get murky when the ruling party does not lend clarity on its current stance, especially considering the several misgivings about documentation and proof of citizenship.

Identifying illegal foreigners – whose job is it?
The Central Government is vested with powers to deport a foreign national under section 3(2)(c) of the Foreigners Act, 1946. These powers to identify and deport illegally staying foreign nationals have also been delegated to the State Governments/ Union Territory Administrations and the Bureau of Immigration under the Foreigners Act, 1946. Detection and deportation of such illegal immigrants is a continuous process. Statistical data of cases regarding illegal immigrants is not centrally maintained.

I think the BJP should run a better PR machine with focus on three central aspects of the CAA: (a) that the CAA is an amendment to the existing Citizenship Act, 1955, (b) that it only speeds up the process of granting citizenship to members of certain communities, and (c) that it does not relate to the citizens of India.

The CAA, Demographics, & Identity

Note: Dear Reader, please ignore the alignment and other issues related to this post; with great difficulty I could publish this post.


The Citizenship (Amendment) Act 2019 has become a new rallying point for the detractors – both in the political and non-political fields. 

The liberal cabal, also called the ‘secular brigade’, were stunned with the abrogation of Article 370 and the Supreme Court’s judgment on the Ram Mandir issue. The BJP-led NDA has been accused of anti-Muslim bias. Now they are frothing at the mouth, again.

Highlights of the CAA

The below listed important provisions are excerpted from the ‘The Citizenship (Amendment) Act, 2019, which is an act further to amend the Citizenship Act, 1955. 

• Persons belonging to the faiths of Hinduism (Hindus), Jainism (Jains), Sikhism (Sikhs), Buddhism (Buddhists), Zoroastrianism (Parsis), and Christianity (Christian) who entered India on or before 31 December 2014 will not be treated as illegal migrant.
  
  
• Such person shall be deemed to be a citizen of India from the date of their entry into India.
   
• Under the Citizenship Act, 1955, the most important requirement for citizenship by naturalization is that the applicant must have resided in India during the last 12 months, and for 11 years of the previous 14 years. The CAA relaxes this 11-year requirement to six years for persons belonging to the above-mentioned religions and three countries.
  
  
• Nothing in this section shall apply to tribal areas of Assam, Meghalaya, Mizoram or Tripura as included in the Sixth Schedule to the Constitution and the area covered under 'The Inner Line' notified under the Bengal Eastern Frontier Regulation, 1873.
  
  
• The Inner Line Permit allows an Indian citizen to visit or stay in a state that is protected under the ILP system. The system is in force today in the north-eastern states of Arunachal Pradesh, Manipur, Meghalaya (notification issues recently), Nagaland and Mizoram; no Indian citizen can visit any of these states without an ILP unless he or she belongs to that state, nor can he or she (over)stay beyond the period specified in the ILP.
  

As you see, there is nothing anti-Muslim here. Also, it has nothing to do with Indian citizens.

A Muslim from any country, including from Afghanistan, Bangladesh, and Pakistan, can apply for Indian citizenship. However, she will have to come through the normal process, and not through the expedited process that will be available to non-Muslims from these countries.

The three countries of Afghanistan, Bangladesh, and Pakistan have been explicitly mentioned because they are avowedly Muslim, with Islam as a state religion. It is an open secret that religious minorities of Hindus, Christians, Jains, Buddhists, and Parsis are greatly discriminated against, persecuted in every way possible, and denied basic freedoms.

Forced conversions to Islam are an ugly fact of life while blasphemy laws are routinely used to harass and intimidate religious minorities in these countries.

Tamil Hindus of Sri Lanka

A moot question that many people have raised relates to the Hindu Tamils of Sri Lanka. Why haven’t they been included in the CAA?

It is true that the Tamil speaking Hindus in Sri Lanka were, for decades, severely discriminated against, on the basis of their ethnicity, by the majority community of Sinhala-speaking Buddhists. In fact, such discrimination was the fundamental reason behind the rise of Tamil separatism, spearheaded by the dreaded Liberation Tigers of Tamil Eelam (LTTE).

However, ever since the end of the war that effectively smashed the LTTE out of existence, the Sri Lankan government has ended decades-old discriminatory practices against the Tamil Hindus. Today, Hindus are not discriminated against in Sri Lanka like they were in the past.

NE India: Identity Crisis & Changing Demographics

A social group may fear that its identity and culture would be swamped, whether within a state or in the country at large. Smaller groups within a state or province may have legitimate fears of being overridden by larger or more powerful groups.

The idea of difference, or strangeness, dominates the human psyche. As a species, we believe that we are ‘different’ from animals (though science would classify us as mammals, and therefore an animal species). Even as individuals, we believe that we are different from ‘the others’. This belief, the outcome of social, cultural, and religious moorings, shapes our identity. It also develops our perspective, shapes our attitude, and defines our understanding of the world around us.

In a multi-cultural and multi-religious country like India, the interests of various groups tend to diverge, which, unfortunately, has engendered a divisive nature in us. Concerns, arising from threats to one’s distinct identity, often precipitate the process of transformation of a religious or ethnic or linguistic or cultural identity into a political movement designed to ‘protect’ the so-called distinct identity.

India’s NE states are characterized by great religious, ethnic, linguistic, and cultural diversity. Meghalaya, Mizoram, and Nagaland are Christian majority states; Sikkim has a Buddhist majority; Tripura has a Hindu majority; Arunachal Pradesh has a Buddhist and Christian majority, while Manipur has a Christian and Hindu majority (in equal measure).

The 'Outsiders' in NE

The native people of Assam have, for long, resented the presence of outsiders amidst them. By ‘outsiders’, we mean the illegal migrants from neighbouring Bangladesh who have poured into Assam, West Bengal, Meghalaya, and Tripura.
The Assamese accuse the Bangla-speaking illegal Muslim migrants of grabbing the local economic resources, grabbing land, and imposing their way of life on the hapless natives. In some parts of Assam, illegal Bangladeshi migrants constitute nearly 40 per cent of the population.

In her incisive monograph titled, ‘Illegal Migration from Bangladesh’, for the Institute for Defence Studies and Analyses, Pushpita Das, writes that:

• The unrelenting migration from East Bengal/East Pakistan (later Bangladesh) into Assam, Tripura and West Bengal was clearly brought out in the census data on population growth of these bordering states. For example, in the first three decades after independence, Assam registered an overall population growth of around 35–36 per cent, way ahead of the national average of around 21–25 per cent, indicating a rise of population through migration.
  
• The Bangladesh Liberation War of 1971 triggered yet another massive inflow of refugees into India. It was estimated that close to 10 million people from East Pakistan had entered India.
  
• To make matters worse, most of the migrants who were deported from Assam in the 1960s re-entered the country. The steady rise of Muslim population in the state from 24.68 per cent in 1951 to 28.43 per cent in 1991 to 34.2 per cent in 2011 is also taken as an indication of large-scale migration from Bangladesh, an assertion further reinforced by the increase of Muslim population in the bordering districts of Goalpara, Nowgong and Cachar, from 42.94 per cent, 34.18 per cent and 38.49 per cent in 1951 to 51.31 per cent, 38.42 per cent and 45.47 per cent respectively in 2001.
  
• Post-independence, Tripura also witnessed massive inflow of people from East Pakistan, a majority of whom were Hindus. As a result, in the first decade after independence, the state’s population increased by 78.71 per cent, which was highest in the country. In the subsequent three decades, the population growth rate continued to hover around 30–35 per cent. The share of tribal population in the state, on the other hand, decreased from 53.16 per cent in 1941 to 31.50 per cent in 1961, which further decreased to 28 per cent in 1981. (end of excerpt)
  

In this context it is pertinent to know that perhaps the bloodiest fight over resources between the natives and the illegal migrants took place in Nellie in Assam’s Nagaon district in 1983, when over 2,000 migrant Muslims, including women and children, were killed in attacks by local tribals.

An Aside on Demographics of Bengali Speakers in NE India

The total number of Bengali speakers in India, as per Census 2011, is 9,72,37,669 (9.72 crore approx.). Of these 7,86,98,852 (7.86 crore approx.) reside in West Bengal. A total of 1,85,38,817 (1.85 crore approx.) Bengali speakers reside outside WB.

Where does most of the 1.85 crore Bengali speakers reside? The table below lists the absolute number of Bengali speakers in NE states, most of which are predominantly tribal.   

Source: Census 2011

Most importantly, large-scale illegal migration into West Bengal and NE states has led to a sharp fall in the availability of land for cultivation and great scrambling for mostly unskilled jobs. The native folks residing in various NE states deeply resented (and continue to resent) the presence of illegal migrants who were not taking away their sources of livelihood but were also, in some places, imposing their way of life on the natives.

As you can see, the people of Assam and NE states are protesting not just against people of a particular religion, but against all ‘outsiders’ who they accuse of nibbling away at economic opportunities and swamping their way of life.

As for the CAA in general, all it has done is to reduce the window of waiting period for the persecuted minorities in three countries to get Indian citizenship from 11 years to five years.

Last Word

As you must have observed, most of the ‘violent’ anti-CAA protests are taking place in BJP-ruled states. In states ruled by the Congress or where the Congress is in power via coalition, no violent protests have taken place. Even in Hyderabad’s Old City area, a stronghold of the AIMIM, a staunch Muslim party, there have been no violent protests. 

What this tells us is that the protests by the Muslim community in BJP-ruled states are politically sponsored by anti-BJP forces.

I think a great failing of the BJP has been ‘communication’. The party has several effective public speakers, yet they have failed miserably in communicating to the public, especially Muslims, that the CAA has nothing to do with Indian citizens.

It is pertinent that the Central Government carefully manages the aspirations of distinct groups, as this is critical to ensuring social stability and maintenance of peace and order. Also, it would be great if the BJP runs an effective information campaign about the CAA to counter the misinformation and malacious propaganda about the CAA.

$543 Billion!

According to India’s Ministry of Finance’s report on external debt, India's external debt was at around $543 billion as at end-March 2019. In terms of external debt ranking, India ranks 24th in the world.

External debt of India is the money owed by India to foreign creditors. In simple words, it is the money we have borrowed which we have to pay back (along with the interest on it).

World’s Most Indebted Nations
With a debt of $20,263 billion, the United States is the world’s most indebted country, i.e., it has the highest external debt. In fact, the U.S.’ external debt is a tad lower than the combined external debt of the three next ranked countries: the United Kingdom (second rank at $8,491 billion), France ($6,470 billion), and Germany ($5,800 billion).

Types of Debts
As you know, based on maturity (when it becomes due for payment), there are two kinds of debts: long-term and short-term.

A loan with a maturity period of more than one year is termed long-term debt.

A loan with a maturity period of less than one year, i.e., this debt would become due for repayment in the next twelve months, is called short-term debt.

Short-term debt includes both the principal and the interest on such loans. In other words, short term external debt includes short term debt by original maturity as well as long term debt (that has become due for maturity).

A government (just about any authority) prefers long-term debt for a fundamental reason: the longer the maturity period of the debt the lower the pressure on repayment.

In this context, it is pertinent to cite the breakdown of India’s external debt by maturity: about 80 per cent of the total external debt is long-term (i.e., about $434 bn of $543 bn). It is a no-brainer to say that the lower short-term debt works in the country’s favour.

Components of External Debt
There are several components of India’s external debt. However, for the common person to understand something as complex as external debt, the following are the main components of India’s external debt:

• Multilateral credit – borrowed by the Government of India from institutions like the International Monetary Fund and the World Bank;

• Bilateral credit – borrowed by the Government of India from other countries (like Japan);

• External commercial borrowings (ECBs) – these are the borrowings of companies like Bharti Airtel from abroad;

• Deposits of Non-Resident Indians (NRIs). NRI deposits are treated as liabilities as they have to be repaid to the depositors, and

• Foreign Institutional Investment (FII) – investment by foreign fund houses (like mutual funds) in India’s stock markets and government securities.

Sources of the external debt of $543 bn
The Reserve Bank of India has a lowdown on the debt mix of the Government of India.  

 

 As you deduce from the source mix, just about 19 per cent of the total external debt is owed by the Government of India. This government debt is also called ‘Sovereign’ debt. The remaining part of the external debt is non-government debt. 

Vulnerability of the Indian economy
India is not vulnerable to any major or minor problem arising on the external debt front. The World Bank’s SDDS says that there is no vulnerability of the Indian economy to external shocks on the debt front. India’s foreign exchange reserves (of around $447 billion in November 2019) to external debt is around 82 per cent is within manageable limits. 

That's all folks!

Rising Unemployment in India

The latest data on unemployment in India points to a significant surge. In fact, at 7.5%, the latest unemployment rate is the highest in 38 months, reveals the CMIE data. For calculation of this rate, the base is October–December 2015.

So, what is unemployment rate? 

Unemployment rate is the ratio of the unemployed to the working age population that is willing to work. If therefore considers only a part of the working age population – the part that is willing to work. 

In other words, the ratio of the employed to the working age population is called the employment rate.

India has a total labour force of about 52 crore. A low labour participation rate means fewer people are willing to work. 

In January 2016, the labour participation rate was 47%; it is down to 43% in October 2019, which effectively means that fewer people in the labour force are looking for and participating in work. 

There is a problem here: even though the labour participation rate is down to 43% (i.e., fewer people are participating in work), even these fewer people are not finding jobs (unlike in 2016). 

To put in perspective, of the 43% of the working age population willing to work, 7.5% are unable to find any work.

In light of the global slowdown and the deceleration in the Indian economy, the employment situation is unlikely to improve in the near future.  

The Explainer: Budget at a Glance

In India, there is hardly any economic event that captures popular imagination as much as the Union Budget. This Explainer will focus on the complex budget jargon that puts off even 'interested–in–budget' souls.

What is a Vote on Account?

The Central Government must seek approval of the Parliament to withdraw money from the Consolidated Fund of India to meet expenses.

A full budget goes through a long process; with elections due soon and without parliamentary approval, the Central Government may run out of cash to meet expenses. This may paralyze the functioning of the government (a la the shutdown in the U.S.).

Tell me more about Vote on Account (VoA).

VoA is generally undertaken for only two months and can’t exceed six months.

VoA is taken in two cases:

o   Government is unable to pass a full Budget by 31 March;

o   Term of the current government ends close to 31 March.

VoA is different from Interim Budget in one major aspect:

o   Interim Budget focuses on both revenue & expenditure whereas the VoA focuses ONLY on expenses.

What is a Fiscal Year?

Any twelve–month period that is used for submission of accounts, taxation purposes and to state financial reporting by private and public sector companies is called a Fiscal Year.

In India, the Government has laid down the provision that the 12–month starting on April 1 and ending on March 31 of next year will be treated as a Fiscal Year.

To put it in perspective, this article is being written on 1 February 2019, i.e., in Financial Year 2018–19. This is also called Fiscal Year ’19.

In the same way, the financial year for 2019–20 will start on 1 April 2019 and will end on 31 March 2020. So, on 1 April 2019, we will enter Fiscal Year ’20.

Define Budget.

The Budget is a statement of revenues and expenditures for the coming fiscal year, i.e., the one that starts on April 1 of this year.

What does the Budget consist of?

Look at the table graphic below. This document titled, Budget at a Glance, is the best document to understand the components of the various types of figures in the Budget.

The Union Budget 2019–20 consists of the following:

(a)   Actuals for 2017–18,

(b)   Budget Estimates for 2018–19,

(c)   Revised Estimates for 2018–19, and

(d)   Budget Estimates for 2019–20.

The Actuals for 2017–18 may be represented as such but they STILL would be PROVISIONAL only. This means that these figures are NOT the final figures for 2017–18 but are subject to further revision. In fact, the final figures for 2017–18 will only be available toward the end of Financial Year 2018–19 (or Fiscal Year ’19).

Budget Estimates (BE) relate to the figures set out by the Finance Minister in his Budget Speech last year (i.e., in February 2018) for the Financial Year 2018–19.

However, all figures – related to revenue collection, expenditure, other allocations – are subject to change. These numbers are mere ESTIMATES and not actuals. As the year progresses, such figures may sometimes need to be revised. For example, if there is low industrial and agricultural activity (meaning lower economic output), tax collections may dip. 

This, in turn, will reduce the government’s Revenue Receipts.

In such case, the Government may revise the Budget Estimates (made in the Budget). Such altered figures are labeled Revised Estimates (RE). These RE are listed in the third column.

In the fourth and last column, you will find Budget Estimates for the coming Financial Year 2019–20. These figures reflect the various estimates made by the Government in terms of Receipts (including tax collections) and Expenditures (including interest payments and salary payments to government employees).