News Wrap


Drying up of demand for credit, between November 2016 to February 2017, has led to a fall in the growth of bank credit, to a multi-decade low of 5.1% (approx). Businesses are cutting down on borrowing, due to the disruptions caused by demonetisation, in spite of the pay panel hike, good rains, and some interest rate cuts. Purchasing Managers Index (PMI) data shows that both manufacturing and services have contracted in January 2017. The upcoming manufacturing activity is also weak, as per the PMI order-to-inventory ratio. While input prices have been rising, they have not yet been passed on to final prices. Corporate margins have worsened. 58% of bank loans, and 88% of non-performing assets are with large borrowers. Although very little fresh investment was taking place even before demonetisation, there was a consumption push. With the bulk of demonetised currencies deposited / exchanged, the black cash money not returned to banks is about Rs 50,000 crore. Over Rs 15 lac crore worth demonetised currency notes of Rs 500 and Rs 1000 have been deposited with banks. Corrupt money is already invested in real estate or gold. Short term disruption in economic activity, and demand contraction arising out of demonetisation, have led to downside risks to India’s economic growth.

Farmer Suicides
Between 2014 and 2016, farmer suicides in India rose by a steep 43%. There were 5650 farmer suicides in 2014, 8007 in 2015 and about 9000 in 2016. Maharashtra experienced two successive years of drought, and recorded the highest number of farmer suicides, accounting for nearly 38% of deaths. Bengal has reported nil farmer suicides for 2015 and 2016. Telengana and Karnataka are second and third for farmer suicides. The cases have shot up, even though nine states and seven union territories have recorded no cases at all. Highly erratic and inadequate monsoons in the last three years has aggravated problems for people engaged in farming. Suicides by agricultural labourers in the country, during the same period, recorded a steep decline by 31.5%. Maharashtra has recorded the highest number of suicides in the category of agricultural labourers, as well. With a major decline recorded in the number of suicides of agricultural labourers, the overall number of suicides in the farming sector, recorded a marginal 2% increase during 2014 to 2016. Government data shows that 80% of farmers killed themselves in 2015 and 2016, because of bankruptcy or debts, after taking loans from banks and registered microfinance institutions.

The Rs 10,000 crore Ken-Betwa river-linking project is expected to irrigate the drought-prone Bundelkhand region (Uttar Pradesh state). In the process, there is a risk that it will submerge about 10% of the Panna Tiger Reserve in Madhya Pradesh, which is considered as a model tiger conservation reserve. The project consisting of a 230 km long canal and a series of barrages and dams, connecting the Ken and Betwa rivers, will irrigate 3.5 lac hectares in Madhya Pradesh, and 14,000 hectares of Uttar Pradesh, in Bundel-khand region. The National Institution for Transforming India (Niti Aayog) has recommended that Madhya Pradesh contribute 40% of the profit cost, with the Union Government contributing 60%. However, the Union Ministry of Water Resources has been opposing the proposal, and demands that 90% of the funds be routed through the central government. More delays to the project can be expected. Environmental clearance to the project, has been given on 30 December 2016, by the National Board for Wildlife and environment clearance panel. For the first time, a river project is being located within a tiger reserve.

Power From Nepal
The India-Nepal Power Trade Agreement (PT) of October 2014, had eased bottlenecks for attracting foreign direct investment to Nepal, in export oriented power projects. The 19 December 2016 guidelines on Cross Border Trade of Electricity issued by India stipulates that only Nepal-based companies, wholly owned by the Indian government or the public sector, or private companies with 51% or more Indian stake, would be eligible to export power from Nepal to India. The new rules are replete with protectioninst measures in the energy sector, where India has an increasing deficiency. The companies owned or controlled by the Nepal government will be allowed to sell power in India upon obtaining a one-time approval from Indian authorities. This makes the Nepal Electricity Authority (NEA) and other projects owned or controlled by the Nepal government, eligible to export power to India. But Nepali investment alone cannot tap the approximately 43,000 mw of Nepal’s hydro-potential. Other countries can export power to India only ‘‘after obtaining the approval of the designated authority, on case-to-case basis’’.

Israeli Settlers
Silwan, lies in a valley below the Old City of East Jerusalem. Like the rest of Palestine of East Jerusalem, most of its residents live below the poverty line. The streets of Silwan are filled with mud, when the winter rains pour. The area features prominently in the Bible. It is a focal point for right-wing Israeli groups, that try to encourage Jewish settlements in the occupied territories. These groups have been secretly buying a number of properties, offering a lot of money. In December 2016, US President Barack Obama’s administration abstained on a resolution of UN Security Council, condemning such settlements, rather than wielding the usual veto. Prime Minister Binyamin Netanyahu, of Israel is considering sanction to build more than 600 new homes in three other East Jerusalem settlements. A single three-storey block of flats is under construction in Silwan, for a handful of Jewish settler families. Silwan has only a few hundred Jewish residents, and the Palestinians expect it would be in their future capital. Israeli hawks consider the small, Jewish settler population, as a way of preventing the division of Jerusalem, in a future peace agreement. The pro-settler political parties wish to annex Ma’ale Adumim, one of the largest settlements in the occupied West Bank, and at an opportune moment, annex the West Bank entirely. US President Donald Trump’s election presages the Messianic Age.

Vol. 49, No.39, April 2 - 8, 2017