 Good evening aspirants, welcome to the Hindu Daily News Analysis brought to you by Shankar Aizakadami for the date 6th of February 2023. These are the articles which we are going to discuss today. Now let's start with the first article for the day. Have a look at this FAQ article taken from yesterday's newspaper. The article talks about various steps taken by the government in the 2023-24 budget to reduce fiscal deficit and spark growth in India. It also talks about whether the steps taken by the government are sufficient to achieve its target of reducing the fiscal deficit to 4.5% by the fiscal year 2025-26. So in our discussion today, we will look at the points which are discussed in the article. Other than that, we will also see some basics regarding the different types of deficits. With this information, now let's get into the discussion. In the 2023-24 budget, the union government has taken some steps to bring down the revenue deficit. Here note that the revenue deficit in the year 2022-23 is 4.1% of GDP. In the 2023-24 budget, our government is planning to bring it down to 2.9% of GDP. Here, revenue deficit is the difference between revenue expenditure and revenue receipts. Revenue receipts include the money earned by the government through tax and non-tax sources. While the revenue expenditure includes salaries, interest payments, pension, subsidies and administrative expenses. The government need to bring down the revenue expenditure in order to reduce the revenue deficit. For example, in the previous year budget, it was estimated that nearly 3 lakh crores is to be allotted to food subsidy. This was brought down to only 2 lakh crores in the next year budget. Like this, the fertilizer subsidy was also brought down from 225,000 crores to only 175,000 crores in this year's budget. Fuel subsidy has also been brought down from 9,000 crores to only 2200 crores between the same period. All these efforts of the government will bring down revenue expenditure which in turn will bring down the revenue deficit. In addition to bringing down the revenue deficit, the reduction in revenue expenditure will also help bring down the fiscal deficit. Here, what is fiscal deficit? See, fiscal deficit is equal to total expenditure of the government minus total income of the government in the particular fiscal year. See, it is a broader term when compared with the revenue deficit. In fiscal deficit, total expenditure includes revenue expenditure plus capital expenditure. While the total income includes revenue receipts plus non-debt capital receipts. Non-debt capital receipts include proceeds from disinvestment and recoveries of loan which has been previously provided by the government. To address this deficit, the government must borrow from the market. So the fiscal deficit value is equal to the government's borrowing and other liabilities. Look at this table showing the fiscal deficit of the government over the past few years. If you can notice, there was a significant spike in the year 2020-2021. This was due to the onslaught of COVID. Because of COVID, government increased its expenditure. So there was a huge fiscal deficit in that particular year. Here note that FRBM Act of 2003 says that the Indian government need to maintain a fiscal deficit of only 3% aged of its GDP. But you can note that India has not been able to maintain this particular level of fiscal deficit. This was due to COVID and its after-effect. So our government is now planning to reduce the fiscal deficit to 5.9% of GDP in the upcoming year. In the medium term, it also plans to reduce the deficit to only 4.5% of GDP by the year 2025-2026. Here note that the government also plans to bring down the primary deficit. Here it is planned to bring down the primary deficit from 3% of GDP in 2022-23 to 2.3% of GDP in the Union budget 2023-24. Here note that primary deficit is nothing but the difference between the fiscal deficit of the current year and the interest paid by the government on loans of the previous years. So we can simply say that primary deficit is equal to fiscal deficit minus interest payments by the government on its previous year loans. This is all about the various kinds of deficits. Now let us move forward to see the capital expenditure of our government. Finally, our government has taken steps to increase capital expenditure and infrastructure spending. In the budget 2023-24, capital spending is expected to rise to 3.3% of Indian GDP. Now you may wonder what is the total GDP of India? See total GDP of India is around 302 lakh crores. So 3.3% of Indian GDP will be around 10 lakh crores. So this 10 lakh crore is the amount which is going to be spent by the government on the capital expenditure. Here note that total budget expenditure of the year 2023-24 is 45 lakh crores. Out of this 45 lakh crore, 10 lakh crore is the year market for capital expenditure. Remaining 35 lakh crore is going to be spent on revenue expenditure. This is all about a bird's eye view of India's GDP, its revenue expenditure and its capital expenditure. Here note that capital expenditure of the Indian government is increasing year on year. Last year it was only around 7.5 lakh crores. But for the fiscal year 2023-24, it is going to be around 10 lakh crores. If you can notice, there is a 2.5 lakh crore increase in the capital expenditure of the government. Now you may have a doubt, why is government increasing its capital expenditure? For most part of the 2022, inflation in India has been very high. To address the increasing inflation, the RBI has increased its rate. This move of the RBI has reduced the money supply which in turn has made the credit cost layer. High cost of credit might bring down investment, which in turn will bring down economic growth. So to address this problem, our government has increased its capital and investment expenditure. So this is the answer for the question, why is Indian government increasing its capital expenditure? Our government is of the opinion that infrastructure investment has a larger multiplier effect on economic growth and employment. So to make sure that Indian economy continues in its growth path, our government has increased its capital expenditure to nearly 3.3% of its GDP. Also note that focusing on economic growth will bring down the fiscal deficit. How is this possible? The fiscal deficit is expressed as a percentage of GDP. As I already said, according to the FRBM Act, India needs to maintain a fiscal deficit of only 3% of its GDP. So this is how fiscal deficit is expressed as a percentage of GDP. If the denominator of GDP expands, it will reduce the overall fiscal deficit to GDP ratio. For example, if the fiscal deficit is 100 rupees and GDP is 1000 rupees, then the fiscal deficit is 10% of GDP. If the fiscal deficit increases to 200 rupees and GDP increases to 2500 rupees, then in this fiscal deficit is only 8% of GDP. So by increasing the capital expenditure, we can increase the overall GDP of our country, which in turn will bring down the fiscal deficit which is expressed as a percentage of GDP. Now all these measures are taken to ensure that our government stays in the path of fiscal consolidation and achieve the fiscal deficit target of 4.5% of GDP by the year 2025 to 2026. But are the steps taken by the government enough? The rating agency Moody's is of the opinion that government might find it difficult to achieve this fiscal deficit target due to the slow fiscal consolidation process. This is all regarding this discussion. We have to wait and watch whether the Indian government has been able to achieve the fiscal deficit target of 4.5% of its GDP by the year 2025 to 2026. With this, we have come to the end of this discussion. Through this discussion, we have seen about the term deficit and the various kinds of deficit calculated in India. We also saw about the fiscal deficit target set by the Indian government. And finally, we ended our discussion by seeing the rating agency Moody's opinion of the Indian government's fiscal consolidation target. See if you are new to this preparation, you might have found this video a little bit difficult. But if you have had a broader understanding of the economic concepts, you will find this video very useful. With this note, let's get into the next article discussion. Take a look at this news article given here. This article talks about the Archaeological Survey of India. As per the news article given here, the Archaeological Survey of India has finally decided to form a special committee. See, this special committee has been formed to trace and certify 24 protected monuments which have gone missing. So, in this context, let us understand few facts about Archaeological Survey of India in Prillam's perspective. See, Archaeological Survey of India or ASI is an attached agency of the Ministry of Culture which is functioning under the Union government. It engages in archaeological research and conservation. It also tries to protect and preserve ancient monuments and archaeological sites in the country. Here, remember, ASI regulates all archaeological activities conducted in the country through the provisions of the Ancient Monuments and Archaeological Sites and Remains Act 1958. It also regulates the activities which are carried out under the pretext of antiquities and Art Treasure Act 1972. Talking about its origin, see, archaeological and historical pursuits in India begin with the efforts of Sir William Jones and his founding of Asia Tick Society in the year 1984 in Calcutta. Later, in the year 1871, the Archaeological Survey of India was created as a governmental department with Alexander Cunningham elected as the first directorate general. Here, note one crucial fact. This Alexander Cunningham only is known as the father of Indian archaeology. From the start of Archaeological Survey of India in the year 1871, up until 1904, there was no legislation to protect the important monuments of the country. During this time only, Lord Cursan became the voice of India. This situation changed with the passing of the Ancient Monuments Preservation Act of 1904. This law gave Archaeological Survey of India a firm footing and since then ASI has been successfully conducting excavations which helps in discovering the past of India. Not only discovering the past, but it also functions to safeguard the important heritage structures which are located within the borders of India. If you have visited any old heritage structure in India, there are high chances that you would have come across slapstones with the name Archaeological Survey of India present there. The slapstones gives details about the heritage structure. This is a brief about Archaeological Survey of India. Now, coming to the question whether Archaeological Survey of India is a stash-twery body or not. See, Archaeological Survey of India became a stash-twery body after independence. To be precise, it became a stash-twery body in the year 1958. Here note that Archaeological Survey of India is edited by a Directorate General and is equated in New Delhi. He is assisted by an additional Directorate General, two Joint Directorate General and 17 Directors to carry out his duties. The functions of Archaeological Survey of India are listed below. Interested aspirants can pause the video and quickly go through them. With this, we have come to the end of this discussion. Through this discussion, we came to know about Archaeological Survey of India in Prilam's perspective. With these points in mind, now let's move on to the next article discussion. Have a look at this news article. It has highlighted some excerpts taken from an interview with the Economic Affairs Secretary Ajay Siddh. He has discussed many things about the Indian budget and the state of global and Indian economy in this interview. We through this discussion will try to understand what he says about the three global factors that would have an impact on our economy. The first factor he talks about is the global recession scenario. As you all know, there is a huge recession cloud hovering over the western countries. Due to which, many Fortune 500 companies has been downsizing their labour force. The companies like Metta, Google has already removed some of its employees. This has resulted in a significant slowdown in the global economy as a whole. See, India may take measures to protect our economy. We may do more public investment, but ultimately we are living in a globalised world. Which means, our economy is also dependent on imports and exports to a certain extent. This is particularly true when we consider our services exports to the western countries. See, India exports a huge quantity of services like software as a service to the western countries. Therefore, the massive slowdown in global economy according to our Economic Affairs Secretary will have an impact on our exports and it will subsequently pose a downside for our growth. This is the first issue mentioned in the article, now moving on to the second one. This issue is about inflation. Here note that, to control inflation, US Federal Reserve has been aggressively increasing its policy rate. Why do you think they are doing so? This has been done so people in US will have less money with them and the inflation can be controlled. But this affects the other developing economies. How? Generally, emerging economies such as India tend to have a higher inflation and higher interest rates than the developed countries such as the US. To utilise these high interest rates and to invest in India, financial institutions, particularly the western foreign institutional investors, would borrow money in the US at low interest rates in dollar terms and then they will invest that money in government bonds of emerging countries such as India in the local currency terms. By doing this activity, they will earn a higher rate of interest because of the difference in interest rates. But this scenario changes when the US Federal rises its domestic interest rates. When the US Federal rises its domestic interest rates, the difference in the interest rate of a developing country and the US becomes negligible. And because of this only, foreign institutional investors will pull out money from the Indian market and try to invest the same money in the US market itself so that they will get higher interest rates accompanied with the stability the US government offers. I will explain this using an example. Suppose you borrow Rs 1000 on an interest rate of 5% from me. Here I am US Fed. And you, the foreign institutional investor lend this Rs 1000 out to your friend at 10% interest. Assume this friend is India. Now you will pay me that is the US Fed an interest of Rs 50 only. But you will get Rs 100 from your friend as an interest. So this difference is your profit. The same principle applies here as well. But now the scenario change and I say I will lend money to you only at 10% interest. Then you can't lend the money to your friend and earn a profit if he is going to pay you the same interest of 10%. Investors find no use or find it less attractive to invest in India because of this scenario. This is a cause of worry for emerging economies like us. But the positive sign is that inflation is somewhat moderating in major economies and as a result the central banks are no longer very aggressive in increasing their policy rates. But any increase in policy rate will affect investments in India. This is the second issue discussed in the article. Now coming to the third. This issue pertains to the increase in price of some goods due to the Russia's invasion of Ukraine. As a result of the invasion we are seeing a hike in prices of major commodities like oil, gas or even major metals all around the world. This is the third issue according to the author which has a potential to affect the growth of Indian economy in the next year. These are all the three different issues discussed by the author in the interview. With this we have come to the end of our discussion. Through this discussion we tried to learn about the three major problems which may affect the Indian economy in the next fiscal year. With these learned points in mind now let's move on to the next article discussion. Take a look at this text and context page article. The article gives us the detail of deciding the new capital post the bifurcation of old Andhra Pradesh into two new states. So now we will try to understand the contents of this article in detail. The syllabus required for this article is highlighted here. Interested aspirants can go through it. Now coming back to the article. We all know that Andhra Pradesh was bifurcated by an act of parliament on June 2, 2014. So after the split Telangana came into existence as a new state. The capital of old Andhra Pradesh that is Hyderabad went with the newly created state Telangana. So Andhra Pradesh was left without a capital city. The then government of Andhra Pradesh which was headed by Chandra Babu Naidu decided to declare a new capital city for the state. For this purpose a new committee was appointed which was headed by Sivarama Krishnan. The committee favoured decentralisation so it suggested the Vizag sub-region as a potential capital space. But the then chief minister was of the opinion that Visagapatnam was already a developed city. So he thought of developing a new city which would act as capital for the state of Andhra Pradesh. Here note that Visagapatnam is a port city located on the coast of Andhra Pradesh. Also note that it is a well-developed city. Now you may wonder how development and capital city are linked. See capital cities usually attract people who have very high skill sets. It attracts politicians, high-end administrative officials, lawyers, scientists, bankers and journalists. So when more skilled workforce enter a city there would be a high demand for high-end consumption products. This will further create a demand for high-end technology and manufacturing. It will lead to a special hosting environment for the functioning of the government as well. Since Visagapatnam was already developed the then chief minister wanted a new greenfield capital in a different region of the state. Therefore the government went on to declare that Amravati would be the new greenfield capital which will be built extensively according to the capital needs of the state of Andhra Pradesh. But the coast for a capital city did not end here. In the year 2019, YSR Congress party defeated the Telangu Desam party to form the government. YS Jaganmogan Reddy replaced Chandrababuna Idhu as the new chief minister of Andhra Pradesh. This new government immediately appointed a new committee for deciding the capital issue. This committee was aided by Jeehan Rao. Based on the report of this committee the current chief minister YS Jaganmogan Reddy came up with the three capital plan that is making Visagapatnam the executive capital, Kurnul the judicial capital and Amravati the legislative capital. The objective of this three capital plan was to bring inclusive development to all regions in the state. The plan is that states can be divided into various zones for the establishment of journal planning and development boards. This in turn would ensure balanced regional development, decongestion of capital city and equal geographical wealth distribution across the state. So for this purpose three capital plan was introduced. AP decentralization and inclusive development of all regions act 2020 was paused in the Andhra Pradesh state legislature. The assembly also approved the repealing of AP CRDA Act which was paused in the year 2014. So now what is this CRDA Act? See this Act as I said was paused in the year 2014 to declare the new capital area for state of the Andhra Pradesh. It also provided for the establishment of the Andhra Pradesh Capital Region Development Authority for the purpose of planning coordination and execution of important functions for the planned development of the capital region. See the CRDA Act 2014 introduced a new land pooling scheme. The scheme was offered to the farmers in the capital region and about 33,000 acres were acquired for building the capital at Amaravathi. Here note that many farmers gave the government plan for the development of the new capital at Amaravathi. But this particular act was repealed by the YS Jaganmogan Reddy government citing the cause of inclusive development under the proposed three capital plan. But what happened later was that about 63 farmers approached the Andhra Pradesh High Court against the new act which was introduced in the year 2019. The Andhra Pradesh High Court gave a verdict stating that the state government should follow through with the early year 2014 act where Amaravathi would be chosen as the new capital. Following this, the AP government filed an appeal in the Supreme Court. It cited infringement of rights to federalism by the High Court and it also argued that it is the state's prerogative to decide on its new capital city. After hearing the arguments from both sides, Supreme Court stayed the Andhra Pradesh High Court's order for the development of Amaravathi as the only capital of the state. Supreme Court said that the courts can't act as a town planner. Here note that the Supreme Court has reserved its final judgment and the hearing process is still going on. So what happened now? The Chief Minister of the state in an investor's summit recently declared that Visagapatinam will shortly become the capital and that he will also be shifting to the port city. This has led to a number of contempt petition which is being filed at the Supreme Court. The contempt petitions are based on the fact that Supreme Court has reserved its judgment but Chief Minister of Andhra Pradesh unilaterally is taking a decision that the new capital will be moved to the Visagapatinam. The contempt petitions are asking the Supreme Court to punish the Jaganmogan government for its new capital proposal. This is what is given in this article. Through this article, we came to know about the different trajectories of choosing a new capital in the newly created state of Andhra Pradesh. With all these points in mind, now let's move on to the next article discussion. Take a look at the small snippet displayed here. This article talks about the windfall taxation which has been levied on the domestically produced crude oil and exports of diesel and aviation turbine fuel by the Indian government. See, this taxation has been levied to make the companies pay a certain amount of taxation to the government over the profits which has been made by them due to the increase in the international crude oil prices. So this is the crux of the small snippet given here. In this context, let us understand about windfall taxation in an holistic manner. See, windfall tax is the tax imposed on companies making windfall profits. Here you might have questions about what is meant by the term windfall profit. See, windfall gain or windfall profit is an unprecedented and unanticipated increase in revenue of a company without any additional effort of it but due to an external event. For people who find this statement difficult to process, let me explain this with an example. Let us consider a big rice mandi owner named X. Since rice has a longer shelf life, X has large quantities of rice in his inventory. Let us assume X has 1000 kgs of rice in his inventory. He bought the rice for 30 rupees per kilogram. In normal circumstances, X might sell the rice for 40 rupees per kilogram and makes a profit of rupees 10. But assume that suddenly there is a war between the country and its neighbouring country. There will definitely be a food shortage, right? So the price of rice in the market will increase. Let us say it increases to 80 rupees. What the greedy rice mandi owner X does is, he sells his rice at 80 rupees per kilogram even though he bought the rice for only 30 rupees per kilogram. Through this act of selling, he makes a profit of around 50 rupees per kilogram. Here, he is earning excess profit due to an unprecedented and unanticipated event while doing nothing extra. This is only called as winfall gain or winfall profit. Hope you understand what is winfall gain now. The tax which is levied on this winfall gain is only called as winfall taxation. See, until now I explained to you what is meant by winfall tax. Now, before seeing who levies winfall tax, let us see a little bit of background. See, currently the crude oil industry is making killer profits. This is mainly due to the soaring price of crude oil in the international market fueled by the Russia-Ukraine war. One private oil refinery in India which shall remain unnamed is making record profits. What this private company is doing is importing cheap crude oil from Russia. It is then refining the crude oil in its Indian refineries. Then, it is exporting the refined oil at a very high price as the price of the oil in the international market is still high. Through this process, this private company is making phenomenal profit. So, the central government has introduced this winfall taxation to keep a check on the refinery companies who are gaining from this demand supply mismatch. Now, we got the answer for the question who levied winfall tax. It is the central government. This is all about the terms winfall tax and winfall profit. Through this discussion, we discussed in detail what is meant by winfall tax. With this, let's move on to the next part of our discussion, which is nothing but the prelims practice question discussion. Today, I have taken three different questions. Two will be discussed by me and one will be the quiz question for you. Now, coming to the first question. See, this is a two-statement question and we have to find the correct statements. Let me read out the question first. Consider the following statements. Statement 1. Increase in US-fed policy rates could lead to fund outflow from India. See, the statement is correct. Regarding this, we have seen in the discussion itself. So, statement 1 is right. Now, coming to the second statement. Interest rate hikes by central government will boost economic growth in any economy. See, the statement is incorrect. Interest rate hikes are the primary monetary policy tool used by the central banks to tackle inflation in a country. When interest rates go up in an economy, it becomes more expensive to borrow. So, households are less inclined to buy goods and services, which in turn disincentivizes the businesses to expand their business. Statement 2 is incorrect. So, the correct answer for this question is option A, one only. Now, moving on to the second question. With reference to protected monuments or sites under the archaeological survey of India, consider the following statements. Statement 1. Both the conservation and maintenance of the site will only be done by archaeological survey of India. See, the statement is correct. Once declared as a protected monument, both the conservation and maintenance of the site will only be done by archaeological survey of India. Statement 1 is correct. Now, coming to the second statement. Maharashtra have the highest number of protected monuments or sites in India. See, the statement is incorrect. There are 3686 centrally protected monuments present in India. Uttar Pradesh has 745 monuments, Karnataka has 506 monuments and Tamil Nadu has 413 monuments. These are the top three states with the highest number of centrally protected monuments. So, statement 2 is incorrect. Now, coming to the third statement. In India, to be declared as an ancient monument, the site has to exist for at least 100 years. See, the statement is correct. According to ancient monuments and archaeological sites and remains act 1958, any site in India has to be declared as an ancient monument, only if it has existed for the previous 100 years. So, statement 3 is correct. So, the correct answer for this question is option A-1 and 3 only. Displayed here is the quiz question for you all. Interested aspirants can post the right answer in the comment section. The main practice question is displayed here. Interested aspirants can write the answer and post it in the comment section. With this, we have come to the end of this discussion. 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