March 14, 2016: The shutdown of Unit-1 of Kakrapar Atomic Power Station

March 14, 2016: The shutdown of Unit-1 of Kakrapar Atomic Power Station

General Studies: Daily Capsule

Curtain Raiser –News Update (March 14, 2016)

The shutdown of Unit-1 of Kakrapar Atomic Power Station:

The Kakrapar atomic power plant consists of two units of pressurized heavy water reactors (PHWR) of 220 MW each. These units are more than 20 years old (Date of commercial operation: Unit-1— May 6, 1993 and Unit-2— September 1, 1995). Unit-1 of Kakrapur Atomic Power Station (KAPS) had to shutdown on March 11, 2016 following some leakage of heavy water that is used for cooling reactor core. This incidence coincides with the fifth anniversary of Japan’s Fukushima nuclear disaster.

India’s installed nuclear power capacity stands at 5,780 MW currently. It is to be raised to 10,080 MW by 2017 and 20,000 MW by 2020. Independent assessment of the situation by Atomic Energy Regulatory Board (AERB) and all necessary steps to avert such incidence in the future is essential to meet the planned target.

Some Facts about PHWR:

· Indian Pressurized Heavy Water Reactor (PHWR) are similar to CANDU Reactor (CANada Deuterium Uranium).

· The use of heavy water moderator is the key to the PHWR system.

· It enables the use of natural uranium as fuel

· Hence reactor can be operated without expensive uranium enrichment facilities

 Source: Transparency at any cost, March 14, 2016, The Hindu & other sources

March 9, 2016: Climate Engineering Efforts to fight Global warming

March 9, 2016: Climate Engineering Efforts to fight Global warming

General Studies: Daily Capsule

Curtain Raiser –News Update (March 9, 2016)

Climate Engineering Efforts to fight Global warming:

Climate Engineering Efforts can be divided into two categories: the management of carbon and the management of sunlight

The management of carbon is directed towards removing greenhouse gases from the atmosphere. A prominent example is carbon capture and storage (CCS). Another method for removing carbon dioxide from the atmosphere is to increase forest cover as plants will absorb some of the unwanted carbon dioxide.

The management of sunlight i.e. Solar Radiation Management: Here the plan is to reduce global warming by cutting down the heat absorbed by our planet from the sun. Stratospheric Aerosol Injection (SAI) is one of the examples under this category.

Stratospheric Aerosol Injection (SAI): involves spraying into the stratosphere fine, light coloured particles designed to reflect back part of the solar radiation before it reaches and warms the earth. SAI research is still at a theoretical and laboratory level.

Source: Cooling the earth down by R. Rajaraman, March 9, 2016, The Hindu

March 12, 2016: Industrial Output contracts 1.5%

March 12, 2016: Industrial Output contracts 1.5%

General Studies: Daily Capsule

Curtain Raiser –News Update (March 12, 2016)

Industrial Output contracts 1.5%:

“The Quick Estimates of Index of Industrial Production (IIP) with base 2004-05 for the month of January 2016 have been released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation.

IIP is compiled using data received from 15 source agencies viz. Department of Industrial Policy & Promotion (DIPP); Indian Bureau of Mines; Central Electricity Authority; Joint Plant Committee, Ministry of Steel; Ministry of Petroleum & Natural Gas; Office of Textile Commissioner; Department of Chemicals & Petrochemicals; Directorate of Sugar & Vegetable Oils; Department of Fertilizers; Tea Board; Office of Jute Commissioner; Office of Coal Controller; Railway Board; Office of Salt Commissioner and Coffee Board.” [1]

 “Industrial output shrank for the third straight month, contracting by 1.5 per cent in January 2016. The 1.5 per cent fall in Industrial Output this January was against 2.8 per cent growth in January 2015. Industrial output growth during April 2015-January 2016 was flat at 2.7 per cent.” [2]

“The manufacturing sector, which accounts for nearly 75 per cent of the industrial production index, recorded a fall of 2.8 per cent compared with 3.4 per cent growth in the same period a year ago.” [3]

“In terms of industries, ten out of the twenty two industry groups in the manufacturing sector have shown negative growth during the month of January 2016 as compared to the corresponding month of the previous year. The industry group ‘Electrical machinery & apparatus ’ has shown the highest negative growth of (-) 50.3 percent.”[1]

“Capital goods output— an indicator of investment demand— contracted by 20.4 per cent in January as against a growth of 12.4 per cent a year ago.”[3]

References:

1. http://mospi.nic.in/Mospi_New/upload/iip_11mar16.pdf

2. http://www.thehindu.com/business/Industry/industrial-output-contracts-15-shrinks-for-a-third-straight-month/article8342721.ece

3. http://indianexpress.com/article/business/business-others/iip-shrinks-1-5-on-poor-capital-goods-manufacturing-show/

March 11, 2016: Rajya Sabha (RS) passes Real Estate Bill

March 11, 2016: Rajya Sabha (RS) passes Real Estate Bill

General Studies: Daily Capsule

Curtain Raiser –News Update (March 11, 2016)

Rajya Sabha (RS) passes Real Estate Bill

“Rajya Sabha approved the Real Estate (Regulation and Development) Bill, 2016 that seeks to protect the interests of the large number of aspiring house buyers while at the same time enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in execution of projects. The Bill seeks to put in place an effective regulatory mechanism for orderly growth of the sector which is the second largest employer after agriculture.” [1]

 “The Bill requires setting up a new regulator for the real estate sector. Just as you have SEBI and IRDA for the capital markets and insurance industry respectively, an authority will be created to help frame policies for the real estate sector. 

And as real estate comes under the purview of state governments, individual States are responsible for setting up the Regulatory Authority at the State level. State-level authorities, called Real Estate Regulatory Authorities (RERAs), will now regulate transactions related to both residential and commercial projects. “ [2]

Other Features:

—It’s mandatory for developers to deposit 70% money from buyers in a third-party bank account

— Regulatory authorities have 60 days to dispose of complaints

— Bill has a provision for imprisonment of up to 3 years in case developers are found guilty of fraud

References:

1. http://pib.nic.in/newsite/PrintRelease.aspx?relid=137670

2. http://www.thehindubusinessline.com/economy/more-power-to-the-home-buyer/article8337416.ece

March 10, 2016: Backdrop of Budget 2016-17 and Doubling Farm incomes in 5 years

March 10, 2016: Backdrop of Budget 2016-17 and Doubling Farm incomes in 5 years

General Studies: Daily Capsule

Curtain Raiser –News Update (March 10, 2016)

Backdrop of Budget 2016-17 and Doubling Farm incomes in 5 years:

Backdrop of Budget 2016-17	--- domestic economy confronted with adverse global environment --- agriculture sector reeling from two successive years of drought --- slow down in manufacturing sector
Overall state of economy	Universal feeling that the economy was in a vulnerable state
General Approach to Budget Design	--- Expansionary budget designed to stimulate aggregate demand --- Budget keeping the fiscal deficit in control
The Budget 2016-17	--- embraces fiscal prudence (fiscal deficit to be 3.5 % of GDP for 2016-17) but not at the cost of a cut in government expenditure ---  significant increase in the allocation to agriculture and rural development, as well as infrastructure

Optimism behind achieving the fiscal prudence and increased government expenditure:

Basic assumptions on achieving both, the fiscal prudence and increased government expenditure

--- steep fall in crude oil price, and not passing savings achieved on the import bill to consumers --- optimism (… significant increase in revenue from personal savings …. Divestment and the strategic sale of public sector enterprises will fetch the exchequer the sum of Rs. 56,000 crore (unreasonable as revised estimate for 2015-16 is less than half this figure) …. Hopes to exploit non-budgetary sources of financing infrastructure projects (…. Some infrastructure projects will be funded through public-private partnerships) …. National Investment and Infrastructure Fund (NIIF) allocated Rs. 4,000 crore, hoping NIIF can leverage this to raise additional funds through the bond market …. Approved market borrowings of around Rs. 30,000 crore for several financial intermediaries

Fallout of public borrowings

Public borrowings will crowd out private borrowing if overall credit scenario is not satisfactory

The target of doubling farm incomes within five years: how realistic?

Annual growth required to achieve doubling of farm incomes within five years	Around 14 percent
Challenge	Agriculture Output in India during any five-year period has not even touched half this level
How to meet the challenge?	Magic wand needed to achieve this miraculous feet of 14 per cent growth in Agricultural Output
What if double Agricultural output achieved?	Who will buy double the current volume of agriculture output given the low income elasticity of demand for agricultural output?

Indirect Taxes are also supposed to serve an allocative purpose: Taxes on diesel cars have been increased in order to discourage their use.

 Source: Good economics is good politics by Bhaskar Dutta, March 10, 2016, The Hindu

March 8, 2016: Full marks on adhering to fiscal deficit road map

March 8, 2016: Full marks on adhering to fiscal deficit road map

General Studies: Daily Capsule

Curtain Raiser –News Update (March 8, 2016)

Full marks on adhering to fiscal deficit road map:

Fiscal Deficit for 2016-17	3.5% of GDP
Goal of the Government	Accelerating growth under macroeconomic stability
Questions arise on	·         the credibility of commitment ·         adherence to fixed road map
On credibility front	·         underestimation of expenditure* ·         overestimation of revenue*
Effects of sustained High Fiscal Deficit	·         rise in Debt-GDP ratio ·         increase in interest payments as a proportion of revenues, leaving less for productive expenditure
Impact of High Fiscal Deficit	·         Mandated target of Fiscal Deficit under FRBM Act 2003, is 3% of GDP for the Central Govt. ·         The states taken together will also take 3% of GDP ·         Combined Fiscal Deficit of the Centre and the States will be 6% ·         Both private business and government invest more than they save ·         They draw on the surplus of the household sector ·         Household sector savings in financial assets are also called transferable savings ·         Household savings in financial assets have come down to almost 7.3% leaving very little for sectors other than government to draw on the surplus of the household sector ·         Thus, there is considerable merit in favour of moving towards the target of 3% of GDP

*Fiscal Deficit: Expenditure and Revenue

Total expenditure’s projected increase	10.8%
Burden of the Seventh Pay Commission	·         Not clear to what extent has been taken into account ·         It appears a significant part has been left
So total expenditure will rise	Resulting into underestimation of the expenditure
Gross Tax Revenue Projected to grow	By 11.7%
Receipts from Disinvestment estimated for 2016-17	Rs. 56,500 crore (actual collection of Rs. 25,300 crore in 2015-16)
Projected receipt from Spectrum auction in 2016-17	Rs. 99,000 crore (way above what was obtained in 2015-16)
Thus overestimation of revenues

Source: Full Marks on fiscal deficit by C. Rangarajan, March 8, 2016, The Hindu

March 7, 2016: Centre’s Fiscal Consolidation Road map – a bumpy ride

March 7, 2016: Centre’s Fiscal Consolidation Road map – a bumpy ride

General Studies: Daily Capsule

Curtain Raiser –News Update (March 7, 2016)

Centre’s Fiscal Consolidation Road map – a bumpy ride:

Fiscal Responsibility & Budget Management Act, 2003 (FRBM Act)
Documents to be tabled annually in the Parliament with regard to Fiscal Policy	·         Medium-term Fiscal Policy Statement ·          Fiscal Policy Strategy Statement ·          Macro-economic Framework Statement
Reset of Fiscal Deficit target in 2008-09	Following global financial crisis
Why review of FRBM Act needed?	Has the law allowed the government the elbow room needed to use all the fiscal tools at its command to ensure that the growth momentum is maintained, without either significantly fuelling inflation or curtailing spending on vital and socio-economically relevant development programmes? If it has not, this may be the time to review the Act, and if necessary, amend it significantly
Arun Jaitley’s Budget proposal to have a committee review the implementation of FRBM Act
Possibility of adopting a target range than a specific number
Benefit of target range	It would give the necessary policy space to deal with dynamic and volatile situations such as the one India faces – global economic and financial market uncertainty, a slowdown in China and tepid private investment demand domestically

Fiscal Deficit Road map: depicting elusive target of 3% of GDP

Source: Review the fiscal consolidation path, March 7, 2016, The Hindu

& Elusive 3% Fiscal Deficit Target, January 15, 2016, Business Standard

 http://www.business-standard.com/article/economy-policy/elusive-3-fiscal-deficit-target-116011500032_1.html