Indian Express Editorial Analysis
12 May 2020

1) Reworking the math-


Last Friday, the central government announced its revised borrowing calendar for the financial year 2020-21. It pegs the Centre’s borrowings at Rs 12 lakh crore, up from the earlier budget estimate of Rs 7.8 lakh crore.

This sharp rise in the government’s borrowing does not come as a surprise. With economic activity collapsing, and government revenues expected to plunge(fall), maintaining expenditure at the budgeted levels will itself require a significant increase in borrowings.

The Centre has not clearly spelt out whether these additional borrowings are meant for plugging(filling) its revenue gap, and/or to fund its relief or stimulus(a push for economy) package.



Central government finances were under pressure even before the COVID pandemic. In its latest budget, it had projected gross tax collections to grow by 12 per cent (as compared to the revised estimates) to touch Rs 24.23 lakh crore in 2020-21, up from 4 per cent in 2019-20 (RE). But with sluggish(disappointing) economic growth, and concerns over whether the government will be able to achieve even the revised revenue target for 2019-20, these projections were optimistic(positive) to say the least.

Now, with the sharp deceleration in economic activity, and a quick broad-based recovery unlikely in the near term, the Centre will miss not only its direct and indirect tax targets this year, but will find it difficult to meet even its disinvestment goal of Rs 2.1 lakh crore.

With even state governments likely to increase their borrowings this year, markets will be apprehensive(worried) of the scale of the general government borrowing programme.

The 10-year bond yield rose as much as 27 basis points to 6.24 per cent on Monday in reaction to the revised borrowing calendar, ending the day at 6.16 per cent. The focus will now shift to the RBI and whether it announces an expansion of its open market operations this year. The data so far shows that the RBI has net purchased around Rs 1 lakh crore of bonds this financial year.



(Divestment or disinvestment means selling a stake in a company, subsidiary or other investments. Businesses and governments resort to divestment generally as a way to pare losses from a non-performing asset, exit a particular industry, or raise money.

Bond yield is the return an investor realizes on a bond. The bond yield can be defined in different ways. Setting the bond yield equal to its coupon rate is the simplest definition. The current yield is a function of the bond's price and its coupon or interest payment, which will be more accurate than the coupon yield if the price of the bond is different than its face value.

An open market operation is an activity by a central bank to give liquidity in its currency to a bank or a group of banks)


Given the magnitude(extent) of the changes in the budget projections this year, the Centre as well as state governments would do well to rework their budget math. A re-statement of their budgets would help provide clarity on the state of their finances.

Rise in Centre’s borrowings indicates extent of fiscal stress. Government must present credible fiscal roadmap.


Further, the Centre needs to present a medium-term fiscal roadmap, laying out in detail how it expects economic activity to shape up, how it plans to support the economy during this period, as well as a clear path of exiting from the use of any unconventional policies that may be adopted during this period. Such a credible framework would help alleviate(reduce) concerns.


2) Back on the rails-


Less than two weeks after starting special services for migrant workers stranded in different parts of the country to go back home, the Indian Railways has announced that it will resume passenger trains between Delhi and 15 other cities.

The trains will have only AC coaches, the fare will be equivalent to what is charged for a Rajdhani Express journey, bookings will be made online.



By focusing on premium services, the Railways seem to be targeting a small fraction of the about 20 million passengers who rely on rail transport every day under normal circumstances. At the same time, the national transporter has indicated that it is open to starting more “special trains”.

For an economy that has come to a grinding(complete) halt after the seven-week lock lockdown, these are much-awaited signals. Getting passenger trains back on track is an apt(perfect) follow-up to the graded easing of the lockdown announced on May 1.


The Railways have clarified that passengers will need to wear masks and undergo screening at the station. But given that asymptomatic(showing no symptoms) people constitute a large part of the COVID-19 transmission chain, the Railways and state governments will have to remain alert, exercise utmost caution(care).

They will have to be vigilant(careful) about passengers observing social distancing protocols(rules) at the railway stations and during the journey.

The importance of these measures cannot be overstated(exaggerated) because the trains will ply(run) between some of the COVID-19 hotspots — Delhi, Mumbai, Ahmedabad, Kolkata.


Increasingly, scientists, epidemiologists and policymakers in several parts of the world are coming around to a consensus that the coronavirus is here to stay, and nations will have to find ways to live with the pathogen.

There is also a growing realisation that societies cannot be in perpetual(endless) lockdown — experts have consistently stressed that stringent(strict) lockdowns do not frame the endgame against the pandemic.

This means that the stay-at-home approach, emphasised during the past seven weeks in the country, must now give way to policies that provide room for people’s mobility — albeit(although) cautiously, and taking care to obviate(prevent) any escalation(rise) of the outbreak.


It is welcome, therefore, that the resumption of transport appears to be on the agenda of other ministries as well. Last week, the Union Minister for Road Transport, Highways and MSMEs, Nitin Gadkari, indicated that the government is formulating guidelines for social distancing with a view to resuming public transport.

The civil aviation ministry must also find ways to resume airline services. The challenges of ensuring social distancing at airports and inside aircraft are, of course, very different from those of enforcing such measures in metros, buses, and trains.

Yet the primary goal of the ministries that deal with transport should now be to ensure that society moves to a semblance(appearance) of normalcy, while ensuring people’s safety.


Resumption of limited train services is welcome, will test ability to move towards calibrated(measured) reopening of all transport networks.


3) Target WTO:


Abolish the World Trade Organisation is the kind of demand you would expect to hear from diehard opponents of free trade on the left and right extremes of the Indian political spectrum.


But it has come in a forceful article published last week in The New York Times by a US senator, Josh Hawley, from Missouri.


In his essay, Hawley says the emergency triggered by the corona pandemic is not a mere health crisis. With millions of Americans unemployed, “it is also an economic crisis. And it has exposed a hard truth about the modern global economy: it weakens American workers and has empowered China’s rise.”



Calling for a sweeping(complete) reform, Hawley wants the US to begin by abandoning(leave) the WTO. Hawley acknowledged that under WTO, “capital and goods moved across borders easier than before”; but added, “so did jobs”. “And too many jobs left America’s borders for elsewhere. As factories closed, workers suffered, from small towns to the urban core.”


Hawley’s attack is not limited to the trading system. He takes on the mythos(myth) of the “liberal international order”. He derides(express contempt for) America’s post-Cold War crusade(push) to overturn the system of sovereign states into one without borders and supra-national (having power or influence that transcends national boundaries or government ) institutions in the name of lasting peace and prosperity.


“That new order’s universal peace never quite arrived”, says Hawley. “Instead, the internationalists embroiled(involved) America in one foreign war after another. And their liberal economic order fared little better.

It sent American production overseas, compromised American supply chains, and cost American jobs, all while enriching(benefitting) Communist China.”




Hawley’s critique of the WTO and liberal international order was quickly panned(criticised) by economists and editorialists as wrong in fact and theory. But Hawley is not looking for good grades from his professors.


He is making an important political point amidst(among) a major crisis within the US that has come in the middle of a general election.

Even without the covid-19 emergency, the question of foreign trade and China would have been quite central to Trump’s re-election campaign, as they were in the 2016 elections.


The choice of former Vice President Jo Biden as the Democratic nominee for President has made trade and China even more important in this election.

Biden has been a strong champion of free trade and of economic integration with China.


The Trump campaign is determined target his record on these two issues to secure the crucial vote of working people in the American heartland. Hawley is simply channeling the essence of that argument that is expected to be decisive(deciding) in this election.


As the Trump campaign whips(pushes) up the theme of “Beijing Biden”, the Democrats can’t afford to be seen as defending China and will find hard to be more hawkish(advocating an aggressive or warlike policy, especially in foreign affairs) than the Republicans.


On trade issues, the Democrats are signalling a tilt to the left, but can’t afford to break with powerful backers in the Wall Street and Silicon Valley, who are deeply committed to globalisation. Trump is eager to probe these contradictions.



After his OpEd in the ‘Times’, Hawley has moved a resolution in the US Senate asking Washington to walk out of WTO. The last time the US congress discussed such a resolution was during 2005. The House of Representatives had thrown it out with a massive margin of 338-86.


But trade politics in the US have evolved significantly in recent years. Under Trump, the Republican Party has turned from the champion to a critic of free trade.


The Democratic Party, which embraced globalisation since the early 1990s, has seen the erosion of working class support. Elections this year could reveal if the shifting alignments on trade are now cast in stone and if anti-trade sentiment in America is deep and wide.


In replacing the WTO, Hawley says, “the United States must seek new arrangements and new rules, in concert with other free nations, to restore America’s economic sovereignty”, he suggests. This in turn involves, “building a new network of trusted friends and partners to resist Chinese economic imperialism”.



As it takes a fresh look at the global economy battered(affected) by the coronavirus, Delhi should pay close attention to Hawley’s theme on working with “trusted friends and parters” to restructure international trade. Hawley is not alone in articulating(making) this view.


Last week, Reuters reported from Washington that the Trump Administration is “Turbocharging(make more powerful)” an initiative to rearrange the global supply chains currently centred on China.

Significant political contestations within the US and between the US and China to reform, reorient or bypass(ignore) the WTO system are at hand(stake). All major economies will be drawn into this conflict.



Hobbled(walk in an awkward way) as it was by shaky(uncertain) political coalitions and preoccupied by multiple domestic challenges, India in the mid-1990s struggled to cope with the profound(massive) changes in the global economic order. As the world trade system arrives at a contingent (conditional) moment a quarter of a century later, India is hopefully better prepared.