THE CONTEXT: The Union Budget seeks to complement macro-economic level growth with a focus on micro-economic level all-inclusive welfare. The union minister for Finance &
Corporate Affairs, tabled the Union Budget 2022-23 in Parliament on February 2022.

PART A

• India’s economic growth estimated at 9.2% to be the highest among all large economies.
• 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors.
• PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.

DOWNLOAD PDF


BUDGET INFOGRAPHICS (DOWNLOAD PDF)

THE CONTEXT: The Union Minister for Finance & Corporate Affairs, presented the Economic
Survey 2021-22 in Parliament on 31 January 2022. The highlights of the Economic Survey are as follows:

STATE OF THE ECONOMY

• Indian economy estimated to grow by 9.2 percent in real terms in 2021-22 (as per first advanced estimates) subsequent to a contraction of 7.3 percent in 2020-21.
• GDP projected to grow by 8- 8.5 percent in real terms in 2022-23.
• The year ahead poised for a pickup in private sector investment with the financial system in good position to provide support for economy’s revival.
• Projection comparable with World Bank and Asian Development Bank’s latest forecasts of real GDP growth of 8.7 percent and 7.5 percent respectively for 2022-23.
• As per IMF’s latest World Economic Outlook projections, India’s real GDP projected to grow at 9 percent in 2021-22 and 2022-23 and at 7.1 percent in 2023-2024, which would make India the fastest growing major economy in the world for all 3years.
• Agriculture and allied sectors expected to grow by 3.9 percent; industry by 11.8 percent and services sector by 8.2 percent in 2021-22.
• On demand side, consumption estimated to grow by 7.0 percent, Gross Fixed Capital Formation (GFCF) by 15 percent, exports by 16.5 percent and imports by 29.4 percent in 2021-22.
• Macroeconomic stability indicators suggest that the Indian Economy is well placed to take on the challenges of 2022-23.
• Combination of high foreign exchange reserves sustained foreign direct investment, and rising export earnings will provide adequate buffer against possible global liquidity tapering in 2022-23.
• Economic impact of “second wave” was much smaller than that during the full lockdown phase in 2020-21, though health impact was more severe.
• Government of India’s unique response comprised of safety-nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth and supply side reforms for a sustained long term expansion.
• Government’s flexible and multi-layered response is partly based on an “Agile” framework that uses feedback-loops, and the use of eighty High Frequency Indicators (HFIs) in an environment of extreme uncertainty.

Fiscal Developments

• The revenue receipts from the Central Government (April to November, 2021) have gone up by 67.2 percent (YoY) as against an expected growth of 9.6 percent in the 2021-22 Budget Estimates (over 2020-21 Provisional Actuals).
• Gross Tax Revenue registers a growth of over 50 percent during April to November, 2021 in YoY terms. This performance is strong compared to pre-pandemic levels of 2019-2020 also.
• During April-November 2021, Capex has grown by 13.5 percent (YoY) with focus on infrastructure-intensive sectors.
• Sustained revenue collection and a targeted expenditure policy has contained the fiscal deficit for April to November, 2021 at 46.2 percent of BE.
• With the enhanced borrowings on account of COVID-19, the Central Government debt has gone up from 49.1 percent of GDP in 2019-20 to 59.3 percent of GDP in 2020-21, but is expected to follow a declining trajectory with the recovery of the economy.

External Sectors

• India’s merchandise exports and imports rebounded strongly and surpassed preCOVID levels during the current financial year.
• There was significant pickup in net services with both receipts and payments crossing the pre-pandemic levels, despite weak tourism revenues.
• Net capital flows were higher at US$ 65.6 billion in the first half of 2021-22, on account of continued inflow of foreign investment, revival in net external commercial borrowings, higher banking capital and additional special drawing rights (SDR) allocation
• India’s external debt rose to US $ 593.1 billion at end-September 2021, from US $ 556.8 billion a year earlier, reflecting additional SDR allocation by IMF, coupled with higher commercial borrowings.
• Foreign Exchange Reserves crossed US$ 600 billion in the first half of 2021-22 and touched US $ 633.6 billion as of December 31, 2021.
• As of end-November 2021, India was the fourth largest forex reserves holder in the world after China, Japan and Switzerland.

Monetary Management and Financial Intermediation

• The liquidity in the system remained in surplus.
• Repo rate was maintained at 4 per cent in 2021-22.
• RBI undertook various measures such as G-Sec Acquisition Programme and Special Long-Term Repo Operations to provide further liquidity.
• The economic shock of the pandemic has been weathered well by the commercial banking system:
• YoY Bank credit growth accelerated gradually in 2021-22 from 5.3 per cent in April 2021 to 9.2 per cent as on 31st December 2021.
• The Gross Non-Performing Advances ratio of Scheduled Commercial Banks (SCBs) declined from 11.2 per cent at the end of 2017-18 to 6.9 per cent at the end of September, 2021.
• Net Non-Performing Advances ratio declined from 6 percent to 2.2 per cent during the same period
• Capital to risk-weighted asset ratio of SCBs continued to increase from 13 per cent in 2013-14 to 16.54 per cent at the end of September 2021.
• The Return on Assets and Return on Equity for Public Sector Banks continued to be positive for the period ending September 2021.
• Exceptional year for the capital markets:
• Rs. 89,066 crore was raised via 75 Initial Public Offering (IPO) issues in April-November 2021, which is much higher than in any year in the last decade.
• Sensex and Nifty scaled up to touch peak at 61,766 and 18,477 on October 18, 2021.
• Among major emerging market economies, Indian markets outperformed peers in April-December 2021.

Prices and Inflation

The average headline CPI-Combined inflation moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per cent in the corresponding period of 2020-21.

• The decline in retail inflation was led by easing of food inflation.
• Food inflation averaged at a low of 2.9 per cent in 2021-22 (April to December) as against 9.1 per cent in the corresponding period last year.
• Effective supply-side management kept prices of most essential commodities under control during the year.
• Proactive measures were taken to contain the price rise in pulses and edible oils.
• Reduction in central excise and subsequent cuts in Value Added Tax by most States helped ease petrol and diesel prices.

Wholesale inflation based on Wholesale Price Index (WPI) rose to 12.5 per cent during 2021-22 (April to December). This has been attributed to:

• Low base in the previous year,
• Pick-up in economic activity,
• Sharp increase in international prices of crude oil and other imported inputs, and
• High freight costs.

Divergence between CPI-C and WPI Inflation:

• The divergence peaked to 9.6 percentage points in May 2020.
• However, this year there was a reversal in divergence with retail inflation falling below wholesale inflation by 8.0 percentage points in December 2021.

This divergence can be explained by factors such as:

• Variations due to base effect,
• Difference in scope and coverage of the two indices,
• Price collections,
• Items covered,
• Difference in commodity weights, and
• WPI being more sensitive to cost-push inflation led by imported inputs.

With the gradual waning of base effect in WPI, the divergence in CPI-C and WPI is also expected to narrow down.

DOWNLOAD PDF

1. Believe to Succeed READ MORE
2. Gandhi is remembered, but Gandhi-ism? READ MORE

1. What’s civic versus cultural nationalism? READ MORE
2. What about the bottom half of Indian households? READ MORE

1. In just two years, Indian forests the size of Nagaland were either chopped or thinned down READ MORE
2. How Auroville can teach us all a thing or two about offsetting carbon READ MORE

1. Budget’s missed healthcare opportunity READ MORE
2. EC errs on side of caution: As Omicron cases mild, extending ban on rallies harsh step READ MORE

(Newspapers, PIB and other important sources)

Prelim and Main

1. A NEW SCHEME, PRIME MINISTER’S DEVELOPMENT INITIATIVE FOR NORTH EAST ‘PM-DevINE’ ANNOUNCED; Rs. 1500 CRORE ALLOCATED READ MORE
2. SUMMARY OF UNION BUDGET 2022-23 READ MORE
3. INTRODUCTION OF CENTRAL BANK DIGITAL CURRENCY ‘DIGITAL RUPEE’ ANNOUNCED READ MORE
4. NARI SHAKTI THE HARBINGER OF WOMEN-LED DEVELOPMENT DURING THE ‘AMRIT KAAL’ READ MORE
5. Longest lightning bolt record: 477 miles over 3 US states READ MORE
6. 5 months after nod, ZyCov-D set for rollout in 7 states. Bihar starts getting 1st set of shots READ MORE
7. Over 9,000 tree species on Earth remain undiscovered, says new international study READ MORE
8. Launch Of The Global Center Of Excellence In Affordable And Clean Energy (GCoE-ACE) At IIT Dharwad READ MORE

Main Exam   

GS Paper- 1

1. What’s civic versus cultural nationalism? READ MORE

GS Paper- 2

POLITY AND GOVERNANCE

1. Budget’s missed healthcare opportunity READ MORE
2. EC errs on side of caution: As Omicron cases mild, extending ban on rallies harsh step READ MORE

SOCIAL ISSUES

1. What about the bottom half of Indian households? READ MORE

INTERNATIONAL ISSUES

1. China looks for ways to revive ties with US READ MORE

GS Paper- 3

ECONOMIC DEVELOPMENT

1. Big on hopes, short on ideas: On Union Budget 2022-23 READ MORE
2. Great on growth, not on jobs: Credit for avoiding populist giveaways, but job-creating MSMEs needed more READ MORE
3. Hits and misses of Budget 2022-23 READ MORE
4. Budget 2022 shows agriculture under change. Gone are talks about doubling farmers’ income READ MORE
5. Time for India to Set Up a Fiscal Council READ MORE

ENVIRONMENT AND ECOLOGY  

1. In just two years, Indian forests the size of Nagaland were either chopped or thinned down READ MORE
2. How Auroville can teach us all a thing or two about offsetting carbon READ MORE

GS Paper- 4

ETHICS EXAMPLES AND CASE STUDY

1. Believe to Succeed READ MORE
2. Gandhi is remembered, but Gandhi-ism? READ MORE

Questions for the MAIN exam

1. ‘The pandemic makes forecasts of growth and fiscal variables challenging. So, it is the right time to create a fiscal council that will provide independent forecasts on macro-variables’. Comment.
2. Discuss the need for ease credit availability for the priority sector. Can changes in the co-lending model ease credit availability for the priority sector? Analyse your view.

QUOTATIONS AND CAPTIONS

• Used correctly, a budget doesn’t restrict you, it empowers you.
• The resource crunch manifest in the proposed higher debt issuance is ultimately bound to get more acute in the days ahead, given the Budget’s lack of growth-invigorating proposals.
• During this year, if government cash balances keep rising, and states are unable to scale up spending even after lockdowns are lifted, the government having to reduce its borrowing targets remains a possibility.
• Little has been done to address inequality and insecurity of the poorest in the budget.
• The Budget is notable for its big capex push, ultra-conservative projections and absence of populist proposals.
• It is essential for making informed choices in exercising their franchise.
• It is time democratically elected leaders threw away their masks, stepped out of their ivory towers, moved beyond their own shadows and gave a little more importance to Gandhism.
• Indeed, with income disparities having grown exponentially, there was a case for innovative tax reforms, but clearly, adventurism was not on the Finance Minister’s agenda.

50-WORD TALK

• Modi government’s announcement to tax crypto assets without creating a regulatory framework for their transactions is baffling. The temptation to dip into the digital goldmine is understandable, but the lack of regulations in a highly risky asset category can hurt investors. Rules should be framed before this becomes a reality.
• Chinese analysts were careful to subtly express their views about Xi’s US policy. However, in a thinly veiled criticism, Jia Qinggua, an America expert and member of China’s highest political advisory body, warned China not to unduly focus on national security as it would be self-destructive. These comments will have disconcerted Xi Jinping, coming as they do just months before the crucial 20th Party Congress, where his third term will be decided.

Things to Remember:

• For prelims-related news try to understand the context of the news and relate with its concepts so that it will be easier for you to answer (or eliminate) from given options.
• Whenever any international place will be in news, you should do map work (marking those areas in maps and also exploring other geographical locations nearby including mountains, rivers, etc. same applies to the national places.)
• For economy-related news (banking, agriculture, etc.) you should focus on terms and how these are related to various economic aspects, for example, if inflation has been mentioned, try to relate with prevailing price rises, shortage of essential supplies, banking rates, etc.
• For main exam-related topics, you should focus on the various dimensions of the given topic, the most important topics which occur frequently and are important from the mains point of view will be covered in ED.
• Try to use the given content in your answer. Regular use of this content will bring more enrichment to your writing.

[WpProQuiz 147]

THE CONTEXT: Recently, the Centre has passed ‘The Government of National Capital Territory of Delhi (Amendment) Act, 2021’.The act has come into effect from 27th April 2021. The act is being criticized for being unconstitutional and against the 2018 judgement of the constitutional bench of the Supreme Court of India.

EVOLUTION

• Delhi was given a fully elected legislative assembly and a responsible government through an amendment in the constitution in 1991. Though technically a Union Territory, Delhi was treated as a special case, being the capital of the country, and given a special constitutional status by Parliament in the exercise of its constituent power as against its normal legislative power.
• Article 239AA was added to Part VIII of the constitution, which contains general provisions relating to the administration of Union territories. This article provided for an assembly, fully elected, and a council of ministers responsible to the assembly. It conferred on the assembly the power to legislate on all matters in the state list as well as the concurrent list except land, police, and public order.

THE RELEVANT LAWS

The laws relevant to understanding the relation between the Lieutenant Governor and the Chief Minister in Delhi are:

• Article 239AA of the Constitution,
• The Government of National Capital Territory of Delhi Act, 1991 (GNCT Act),
• The rules formulated under this Act (Transaction of Business Rules), and the relevant judicial pronouncements.
• The recently passed ‘Government of National Capital Territory of Delhi (Amendment)’ Act, 2021.

The relationship between LG and CM: It needs to be said that the precise contours of the sharing of powers between the Lieutenant Governor and the Delhi government are a grey area. The crucial constitutional provision relevant to the issue is Article 239AA (4) which says: “There shall be a Council of Ministers… in the Legislative Assembly, with the Chief Minister at the head to aid and advise the Lieutenant Governor in the exercise of his functions in relation to matters with respect to which the Legislative Assembly has the power to make laws, except in so far as he is, by or under any law, required to act in his discretion.”

DELHI’S PECULIAR NATURE

While this justification for the Chief Minister to appoint the Chief Secretary may hold good for States, is it the same for Delhi? Delhi is a peculiar case, neither being a State, nor a Union Territory. So, Article 239, which deals with Union Territories, does not apply to Delhi. Instead, Delhi is governed by Articles 239AA and 239AB, introduced by a constitutional amendment in 1991.

The crucial constitutional provision relevant to the issue is Article 239AA(4). Two conclusions can be drawn from reading the provision, Article 239AA (4):

• The Lieutenant Governor will have to make decisions based only on the “aid and advice” of the Chief Minister in the exercise of all matters on which the Legislative Assembly has the power to make laws. Consequently, the Legislative Assembly of Delhi has the power to make laws on all matters in the State List and the Concurrent List in the VIIth Schedule of the Constitution, except entries related to public order, police, and land. (See, Article 239AA(3)); and conclusion
• The Lieutenant Governor can act at his own discretion only when there is a specific law conferring this discretion on him. Section 41 of the GNCT Act deals with the discretionary powers of the Lieutenant Governor. There is no such law granting discretion, to the Lieutenant Governor for making such appointments currently.

ABOUT THE NCT (AMENDMENT) ACT

The NCT Amendment Act amends the Government of National Capital Territory of Delhi Act, 1991. The Act provides a framework for the functioning of the Legislative Assembly and the government of the National Capital Territory (NCT) of Delhi.  The Act amends certain powers and responsibilities of the Legislative Assembly and the Lieutenant Governor.

1. Restriction on laws passed by the Assembly: The Act provides that the term “government” referred to in any law made by the Legislative Assembly will imply Lieutenant Governor (LG).

2. Rules of Procedure of the Assembly: The Act allows the Legislative Assembly to make Rules to regulate the procedure and conduct of business in the Assembly. The Act provides that such Rules must be consistent with the Rules of Procedure and Conduct of Business in the Lok Sabha.

3. Inquiry by the Assembly into administrative decisions: The Act prohibits the Legislative Assembly from making any rule to enable itself or its Committees to (i) consider the matters of the day-to-day administration of the NCT of Delhi and (ii) conduct an inquiry in relation to administrative decisions. Further, the Act provides that all such rules made before its enactment will be void.

4. Assent to Bills: The Act requires the LG to reserve certain bills passed by the Legislative Assembly for the consideration of the President. These Acts are those: (i) which may diminish the powers of the High Court of Delhi, (ii) which the President may direct to be reserved, (iii) dealing with the salaries and allowances of the Speaker, Deputy Speaker, and members of the Assembly and the Ministers, or (iv) relating to official languages of the Assembly or the NCT of Delhi. The Act requires the LG to also reserve those Bills for the President that incidentally cover any of the matters outside the purview of the powers of the Legislative Assembly.

5. LG’s opinion for executive actions: The Act specifies that all executive action by the government, whether taken on the advice of the Ministers or otherwise, must be taken in the name of the LG. The Act adds that on certain matters, as specified by the LG, his opinion must be obtained before taking any executive action on the decisions of the Minister/ Council of Ministers.

CONSEQUENCES

1. Committees will cease to exist: The committees of the Delhi assembly including the Public Accounts Committee, the Public Undertaking Committee, etc. Will cease to exist as the rules under which they are set up will become void because these committees scrutinize, inquire into or investigate the decisions of the government.

2. No responsibility of LG for the Delhi legislative assembly: The LG, who will be the government, is under no obligation to implement any law passed by the assembly or carry out the directions of the house as he is not responsible to the assembly.

3. Non-functional government: The elected government of Delhi will wait endlessly for the LG’s opinion without being able to execute their decision. So, the decisions of the cabinet or of the ministers will mostly remain on paper only. Thus, the government will become non-functional.

CRITICISM

1. Negates Cooperative Federalism: This move by the Government of India, not just negates cooperative federalism, but also undermines constitutional norms, democracy, and even the Supreme Court of India’s constitution bench court judgement.

2. Weakens Federal Structure: This will weaken the federal structure of this nation. In a large country like India, with diverse cultures, languages, religions this diversity has to be celebrated.

3. Backward-looking legislation: When the government of India Act, 1935 was enacted, our freedom fighters had also fought against the overriding powers given to the Governor-General. Unfortunately, this bill takes us back to the British era and disempowers an elected government that had been voted in by the people of Delhi. This act takes us back to the legislation of early independent India i.e. Nehruvian era. At that time, there was Lieutenant Governor and there was a municipal corporation. When the member for Rajya Sabha had to be elected, there was a system of elections via the electoral college. People of Delhi would only vote so that members could be elected to the Rajya Sabha. But then, there were 20 Lakh people in Delhi. Today, there are two crore people. Aspirations have grown and this voice came from the ground that the people of Delhi want their voice to be heard.

4. Constitutional Challenge: To use legislative power like this, just because the center can, also raises questions of constitutional governance and constitutional morality. A city of two crore people can’t necessarily be deprived of statehood or be given a rather watered-down version of statehood.

5. Irresponsible use of power by the center: Whenever the center usurps too many powers, it is the states that suffer, the people in the states that suffer. It is rightly said, “Power tends to corrupt, and absolute power corrupts absolutely.”

HOW CAPITAL CITIES ARE ADMINISTERED ACROSS THE GLOBE?

Large countries, especially those with a federal/quasi-federal polity, have great difficulty in allowing their capital cities to function as regular provinces.

1. Washington, DC, USA: Washington DC’s residents got the right to vote in presidential elections only in 1961. Their only representative in the House of Representatives is a delegate-at-large who has no voting rights. They have no representation in the Senate. And remember, this is a country that was founded on the concept of “No Taxation without Representation”. The city has an elected mayor and a 13-member elected council, but while they can propose the city’s budget, Congress approves it. There is occasionally a desultory demand to convert DC into a state, but this has never been seriously considered.
2. Canberra, Australia: Canberra (capital of Australia) is another federally-run capital, with an elected legislative assembly and a CM, such as Delhi. However, they essentially deal with health, education, and the environment. The assembly is competent to make laws, but these can be superseded by the national parliament.
3. London, Great Britain: According to the official website, the mayor of London “has a duty to set out plans and policies for London covering transport, planning and development, housing, economic development and regeneration, culture health inequalities and a range of environmental issues including climate change and air quality”. However, the mayor does prepare the budget for these activities as well as for the police and fire brigade. The 25-member elected Greater London Assembly can only overturn the mayor’s budget by a two-thirds majority. It also scrutinizes the mayor’s proposal and has a monthly question hour at which the mayor, transport, and police commissioner explain their actions.

CONCLUSION: The crux of any government is in the process of the legislation and without the power to implement laws, any government will be reduced to a paper tiger. It is for this reason that the law has clearly established that where there is a legislative power, there has to be executive power. Do not deny the citizens of Delhi their rights. When they voted, it was not only pressing a button. They voted to elect people to govern them. Today, the center is denying them that right to be governed by the government they have voted to power. India’s case is a little different in the sense that LG is a political appointee of the Union Government and enjoys similar powers as governors in various states. He is a nominal head. So, the complete power of the administration of Delhi should not be vested with the LG only.