In News

The NITI Aayog has recently increased the asset monetisation target for the fiscal year 2024-25 (FY25) by ?23,000 crore, bringing the total to ?1.9 trillion. This adjustment aligns with the broader target of ?6 trillion set under the National Monetisation Pipeline (NMP) for the period from FY 2022 to FY 2025.

Understanding Asset Monetisation

Definition

Asset monetisation refers to the process of converting public assets into revenue-generating assets without selling them outright. This includes using assets to generate profit or cash, thereby unlocking their economic value.

Importance

• Revenue Generation: Monetisation creates new revenue streams for governments by leveraging underutilised public assets.
• Focus on Public Assets: The emphasis is on monetising existing infrastructure such as roads, airports, railways, and pipelines, primarily targeting brownfield assets—those that can be improved or repurposed.

Monetisation vs. Privatisation

While privatisation involves complete ownership transfer to the private sector, asset monetisation allows public authorities to retain ownership while benefiting from private sector efficiencies through structured partnerships.

The National Monetisation Pipeline (NMP)

Overview

The NMP is an initiative aimed at promoting sustainable infrastructure financing through the monetisation of operational public assets. It envisions a monetisation potential of ?6 lakh crore, focusing on leasing core assets from the Central government and public sector entities.

Preparation and Coverage

• Collaborative Approach: Developed by NITI Aayog in consultation with infrastructure ministries such as Roads, Railways, and Power.
• Sector Coverage: Encompasses various sectors including roads (27% of the total value), railways (25%), power (15%), and telecom (6%).

Framework for Monetisation

1. Retention of Rights: The government retains ownership, with assets reverting to public authorities post-transaction.
2. Stable Revenue Streams: Focus on de-risked brownfield assets that provide consistent revenue.
3. Defined Partnerships: Establishment of contractual frameworks with strict performance indicators.

Alignment with National Infrastructure Pipeline (NIP)

The NMP is integrated with the NIP, which seeks to attract investments in both greenfield and brownfield projects across all sectors.

Current Status of the NMP

Revenue Generation

As of FY24, the NMP has generated ?3.9 trillion, slightly below the original target of ?4.3 trillion for the initial three years.

Successful Monetisation Examples

• The Ministry of Coal exceeded its target, raising ?1.54 trillion against a goal of ?80,000 crore.
• Mining assets have also been monetised significantly, surpassing their revised targets.

Sectors Lagging

• Railways: Only ?20,417 crore monetised, achieving just 30% of the target.
• Civil Aviation: A mere 14% of its targeted monetisation has been achieved.

Challenges Facing the NMP

• Low Monetisation Potential: The NMP's ?6 lakh crore target represents only a small fraction (5-6%) of the total capital expenditure under the NIP.
• Disinvestment Issues: Many sectors chosen for monetisation have consistently fallen short of their disinvestment targets, raising doubts about achieving future goals.
• Long-Term Rights Concerns: Granting private entities long-term operational rights may be perceived as a form of privatisation, potentially leading to public distrust.
• Budget Clarity: There is a lack of transparency regarding how monetisation proceeds will be allocated within the government budget.
• Potential for Monopolies: Consolidation of asset ownership could lead to monopolistic practices, especially in critical infrastructure sectors.
• Taxpayer Concerns: Taxpayers are wary of the potential for double charges on public assets they initially funded.

Way Forward

• Accelerating Monetisation: The government should expedite contract-based monetisation through Public-Private Partnerships (PPP), particularly in sectors like railways and airports.
• Land Monetisation Initiatives: Engaging real estate companies to develop multi-storey buildings can generate additional revenue while enhancing housing options.
• Establishing Budget Guidelines: Clear budgeting guidelines should be developed to clarify the allocation of funds generated from monetisation, ensuring they are used for infrastructure development rather than operational expenses.

In News:

The Fairwork India Ratings 2024 report, which analyses the work conditions of platform workers on digital labour platforms in India, draws a picture of aggregators who are non-committal to ensuring that workers earn the local living wage and unwilling to recognise collectivisation of workers.

Key Findings:

• Overall Performance: No platform scored above six out of ten, and none achieved top points across the five assessed principles: Fair Pay, Fair Conditions, Fair Contracts, Fair Management, and Fair Representation.
• Study Background: This report is the sixth annual analysis conducted by the Fairwork India Team, in collaboration with the Centre for IT and Public Policy (CITAPP), IIIT-Bangalore, and Oxford University.

Analysis of Welfare Legislation

• The report discusses the evolving nature of platform work and its implications for proposed legislation affecting gig workers in Karnataka and Jharkhand.
• Political interest in gig workers' welfare has increased, but the effectiveness of these initiatives remains uncertain.
• Professors Balaji Parthasarathy and Janaki Srinivasan highlight the importance of ongoing research and advocacy for improving gig worker conditions.

Methodology

• Principles of Assessment: Platforms were evaluated based on five principles, each consisting of two points—one that could only be awarded if the first point was fulfilled.
• Data Collection: Worker interviews were conducted across multiple cities, including Bengaluru, Chennai, Delhi, Kochi, and Thiruvananthapuram.
• Platforms Analyzed: The study included 11 platforms from various sectors, such as logistics, food delivery, and personal care.

Detailed Findings by Principle

Fair Pay

• First Point: Bigbasket and Urban Company were recognized for implementing a minimum wage policy ensuring workers earn at least the local minimum wage.
• Second Point: No platform met the criteria for committing to a local living wage after work-related costs.

Fair Conditions

• First Point: Platforms such as Amazon Flex, BigBasket, and Swiggy provided adequate safety equipment and training.
• Second Point: BigBasket, Swiggy, Urban Company, Zepto, and Zomato offered additional protections, including accident insurance and compensation for medical-related work absences.

Fair Contracts

• First Point: BigBasket, BluSmart, and others ensured contract accessibility and data protection protocols.

Fair Management

• First Point: Amazon Flex, BigBasket, and several others provided due process in disciplinary decisions.
• Second Point: BluSmart, Swiggy, Urban Company, and Zomato were noted for regular external audits and anti-discrimination policies.

Fair Representation

• Despite increased collectivization efforts among platform workers, no platform showed a willingness to recognize collective bodies, underscoring a critical gap in worker representation.

Conclusion

The Fairwork India Ratings 2024 report highlights significant challenges in ensuring fair work conditions for platform workers in India, stressing the need for continuous advocacy and reform in the gig economy.

In News:

The Government is set to launch NULM 2.0, the latest iteration of the National Urban Livelihood Mission (NULM), aimed at enhancing the livelihoods of urban poor and vulnerable populations. This version will specifically target six key groups: construction workers, gig workers, waste management workers, care workers, domestic workers, and transportation workers.

Overview of DAY-NULM

The Deendayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM) was initiated in 2014 by the Ministry of Housing and Urban Affairs to replace the Swarna Jayanti Shahari Rozgar Yojana. It aims to uplift urban poor through organized self-help groups (SHGs), skill development, and access to credit.

Key Features:

• Funding Structure: DAY-NULM operates as a Centrally Sponsored Scheme, with a funding ratio of 75:25 between the central and state governments, adjusted to 90:10 for North Eastern and Special Category states.
• Mobilization of Women: The mission has successfully formed over 831,000 SHGs, mobilizing more than 8.4 million urban poor women by 2023.
• Objectives: It focuses on sustainable livelihoods through skill development, financial access, and entrepreneurship, particularly for women.

Components and Achievements

DAY-NULM includes various initiatives such as:

• Skill training programs.
• Support for self-employment.
• Rehabilitation for street vendors.

Performance Highlights:

• Over 89.33 lakh women have joined SHGs, with 6.12 lakh receiving initial funds.
• Approximately 15 lakh individuals have undergone skill training, leading to employment for 8.20 lakh.
• Surveys have identified 53.76 lakh street vendors, resulting in significant documentation and support.

Introduction of NULM 2.0

NULM 2.0 is a revamped initiative designed to further support urban livelihoods through financial aid and infrastructure enhancements.

Key Features:

• Microcredit Access: Eligible individuals can obtain microcredit of up to ?4 lakh, while groups can access up to ?20 lakh, with a subsidized interest rate of 5%.
• Support for Enterprises: The funding aims to assist beneficiaries in starting small businesses, creating social infrastructure, and providing grants for innovative projects, such as sanitation machinery.

Pilot Initiative

To effectively implement NULM 2.0, the government will conduct a pilot program in 25 cities. This will focus on:

• Identifying urban poor populations.
• Ensuring targeted assistance to improve beneficiaries’ earnings and living conditions.

Conclusion

The rollout of NULM 2.0 represents a significant step in addressing the needs of the urban poor, with a comprehensive framework designed to provide financial support and improve livelihoods. By focusing on critical worker groups and leveraging microcredit, the initiative aims to foster sustainable development and enhance the quality of life for urban vulnerable communities.

Why is it in the News?

India's gross domestic product (GDP) growth for the third quarter (October-December) of the fiscal year 2023-24 has surpassed expectations, coming in at 8.4% compared to the estimated 6.7%.

News Summary:

• India's economy saw a growth of 8.4% in the December quarter compared to the same period last year, surpassing the 7.6% growth recorded in the previous quarter and the forecast of 6.7% as per a Reuters poll of economists.
• Further, the NSO pegged a higher GDP growth rate of 7.6% for the entire fiscal year, up from the initial estimate of 7.3%.
• To comprehend India’s unexpected growth, it is imperative to delve into the diverse aspects of the country's economic landscape, and evaluating the factors underpinning this surprising growth is equally crucial, including consumption patterns, savings dynamics, and investment trends.

What are the Factors Driving India’s Growth Surplus?

• Enhanced Economic Momentum: Initially estimated at 7.3 percent, the GDP growth set a promising tone for the fiscal year.
  • However, the subsequent second advance estimate, incorporating third-quarter data, surpassed expectations.
  • This signals a bolstered economic momentum, notably fueled by increased net taxes contributing significantly to the growth trajectory.
• Impact of Rising Net Taxes and Subsidies: An essential aspect of this growth narrative is the comparison between gross value added (GVA) and GDP growth.
  • While GDP growth stands impressively at 7.6 percent, GVA, excluding net tax effects, registers a slightly lower 6.9 percent.
  • This nuanced distinction underscores the influence of net taxes and subsidies on overall economic performance.
  • Furthermore, with an average growth rate of 8.2 percent for the first three quarters, extrapolations suggest a projected fourth-quarter growth of approximately 5.9 percent.
• Effective Policy Measures and Financial Resilience: Despite GDP figures still below pre-pandemic levels, concerted domestic efforts and policy initiatives have steered the economy toward a 7 percent growth trajectory.
  • A significant factor contributing to this progress is the reinforced state of banking and corporate balance sheets, indicative of the efficacy of strategic policy interventions.

Assessment of Challenges and Expected Downturn:

• Impact of High-Interest Rates: The enduring prevalence of high interest rates presents a formidable obstacle to sustained economic advancement.
  • Elevated interest rates have the potential to deter borrowing and investment, thereby affecting both consumer expenditure and corporate expansion initiatives.
  • This concern is further compounded by the limited effectiveness of monetary policy, given that inflation projections persist above the Reserve Bank of India's (RBI) 4% target.
• Normalisation of Net Tax Effects: The current fiscal period has significantly contributed to GDP growth from the escalation of net taxes (taxes minus subsidies).
  • However, there is an anticipation that the net tax influence on GDP will revert to normal levels in the upcoming year.
  • This normalization implies that the impetus provided by the net tax element to the economic growth rate may diminish, potentially leading to a slowdown.
• Influence of Global Economic Conditions: India's economic performance is intricately intertwined with global economic circumstances.
  • Uncertainties prevailing in the global market, such as trade tensions, geopolitical dynamics, and external disruptions, could trigger spill-over ramifications on India's economy.
  • Consequently, external factors beyond the nation's jurisdiction may exert influence on the overall economic outlook.

Private Consumption, Household Savings, and Evolving Trends:

• Disparities in Growth: The growth disparity between rural and urban areas is notable, with rural consumption likely trailing urban consumption.
  • This discrepancy can be attributed primarily to the disproportionate impact of high food inflation on rural households.
  • The sluggish growth of agriculture, at a mere 0.7%, underscores the challenges faced by the rural economy, where food inflation significantly affects discretionary spending.
• Impact of Food Inflation: High food inflation has exerted a considerable influence on consumption patterns, particularly in rural regions.
  • Nominal food consumption spending surged by 13% last year, indicative of the inflationary pressure on essential commodities.
  • This trend is expected to persist, impacting purchasing power and discretionary spending across both rural and urban landscapes.
• Shifting Consumption Patterns: Household consumption expenditure data reflects a gradual shift towards non-food items over time, mirroring rising per capita income and evolving consumer preferences.
  • This transition underscores the necessity to recalibrate weights in the consumer price index basket, which currently reflects consumption patterns from 2011-12.
• Household Savings: Disaggregated data reveals that household savings constitute a substantial portion, comprising 61% of total savings in the economy.
  • Despite its prominence, the share of household savings in GDP declined to 18.4% in 2022-23, indicating changing trends in savings composition.
  • Household savings are further categorized into financial and physical savings, with financial savings, including bank deposits and securities, witnessing a significant decline to 5.3% of GDP in 2022-23.
  • Conversely, physical savings, driven by borrowings for assets like houses, have increased, reflecting evolving preferences and market dynamics.

Analysis of Investment Trends: Public, Corporate, and Household:

• Private Corporate Investment Patterns: The data indicates a stagnant trajectory in private corporate investments, with no clear signs of revival evident in the fiscal year 2022-23.
  • This stagnation raises concerns, as private sector investments play a pivotal role in propelling economic growth, fostering job creation, and stimulating innovation.
• Public and Household Investment Dynamics: In contrast to private corporate investments, both public and household investments have exhibited substantial growth during the fiscal year 2022-23.
  • Public investments, often influenced by government policies and infrastructure projects, contribute significantly to economic development.
  • On the other hand, household investments, encompassing expenditures on residences and durable goods, serve as indicators of consumer confidence and economic stability.

Way Forward:

• Mitigating Policy Uncertainty: The government must mitigate policy uncertainty and streamline compliance costs.
  • A stable and foreseeable policy landscape is indispensable for fostering private-sector investments.
  • Addressing these concerns is paramount to cultivating an environment conducive to long-term corporate strategizing and sustained economic expansion.
• Encouraging a Comprehensive Revival of Private Investments: Recognizing the pivotal role of a comprehensive revival of private investments in sustaining high growth rates over the medium term is imperative for the government.
  • While the government's emphasis on infrastructure development and targeted initiatives like the Production-Linked Incentive (PLI) scheme has yielded positive outcomes, a more holistic approach is warranted to invigorate investments across diverse sectors of the economy.

Conclusion

India's unexpected GDP growth, underpinned by resilient domestic fundamentals and strategic policy emphasis, necessitates a nuanced examination of various economic facets. As India traverses through these multifaceted dimensions, focused attention on private corporate investments, consumption trends, and savings dynamics emerges as pivotal for achieving sustained and inclusive economic progress. Furthermore, the government's role in ensuring policy stability and minimizing compliance burdens emerges as a decisive factor in unlocking the full potential of India's economic prowess.