Editorial 1 : For the Yamuna to Flow
Context: For the Yamuna to flow - consensus is needed, not political slugfests.
Background: Drinking Water in Delhi
- Delhi relies entirely on water from Haryana, primarily through the Wazirabad Barrage, which receives raw water from the Yamuna.
- The flow at Wazirabad depends on releases from Haryana’s Hathni Kund Barrage.
Challenges
- Lean Season Shortages: Water levels drop during lean seasons, leading to ammonia contamination and water shortages.
- Treatment Plant Shutdowns: Depleted water supply makes water untreatable, causing shutdowns at key treatment plants (Wazirabad, Chandrawal, Okhla, Haiderpur, and Bawana).
- Public Frenzy: Water shortages lead to chaos, with citizens scrambling for tankers and water collection.
Proposed Solutions
- Joint Inspection: Establish a system for joint inspection of water released by Haryana (quality and quantity).
- Independent Monitoring: Create an independent monitoring system with penalties for non-compliance.
- Transparent System: Implement a functional and transparent system to address distrust between governments.
Pollution in Yamuna
- Major Pollutants
- Untreated sewage from stormwater drains.
- Industrial effluent, particularly from unlicensed household industries.
- Solid waste dumping.
- Key Contributors to Pollution
- Najafgarh, Supplementary, and Shahdara Drains: Carry untreated sewage and industrial waste from Delhi, Haryana, and Uttar Pradesh.
- Gurugram: Approximately 80 million litres of untreated sewage are discharged daily into stormwater drains leading to the Najafgarh drain.
- Failed Commitments
- Yamuna Monitoring Committee (YMC): Identified 16 stakeholders responsible for pollution, including Delhi Jal Board, Delhi Development Authority, and governments of Haryana and Uttar Pradesh.
- Sewage Treatment Plants (STPs): Commitments to build STPs in Haryana and UP remain unfulfilled.
- Interceptor Project: Delhi’s project to trap and treat sewage has not achieved its intended outcomes due to incomplete sewer connections and operational inefficiencies.
- Impact: High contamination and ecological degradation of the Yamuna.
Environmental Flow and Ecological Health
- National Institute of Hydrology (NIH) study
- The NIH study was aimed at assessing the flow of water necessary to maintain ecological balance and support essential riverine functions.
- The NIH concluded that the current water withdrawals upstream significantly reduce the river’s flow through Delhi, exacerbating pollution levels and harming aquatic life.
- Recommendation: Regulating water releases from upstream barrages, especially during lean seasons, to maintain a minimum environmental flow.
- Yamuna Monitoring Committee (YMC) Findings
- Delhi suffers from severely reduced flow, especially during the nine non-monsoon months, and this was leading to high contamination and ecological degradation.
- Recommendation: Revisiting the 1994 water-sharing agreement between the basin states of Delhi, Haryana, Himachal Pradesh, Rajasthan, and UP to ensure a more equitable distribution of water.
Political and Administrative Challenges
- Distrust Between Governments
- Annual legal battles in the Supreme Court highlight the lack of trust and coordination.
- Political blame games, such as Arvind Kejriwal’s claim of Haryana releasing “poison” into the Yamuna, exacerbate tensions.
- Lack of Consensus and Will
- Solutions are well-documented but require political will and consensus among stakeholders.
- Central government or judicial intervention may be necessary to enforce compliance.
Conclusion: Given the size and complexity of the issues plaguing the Yamuna, it is time that people at the helm of affairs i.e. politicians, bureaucrats and engineers, address major problems. The solutions are available in black and white. Consensus among the stakeholders is needed to deal with the problem in an equitable and just manner.
Editorial 2 : Keep Eye on Capex Ball
Context: Government needs to spend for India to grow.
Introduction: The Union Budget 2025 carries the potential to impact the economy significantly. It arrives at a crucial time, with the economy facing challenges such as weak GDP growth and low consumer spending. Key expectations include tax reforms to provide relief to individuals and boost consumption, increased capital outlay for infrastructure development, and support for sustainable initiatives in various sectors.
Importance of Capital Expenditure (Capex)
- Role in Growth
- Capex has a high multiplier effect on economic growth, especially during periods of weak consumer spending.
- Critical for achieving the $5-trillion economy target.
- Recent Trends
- Gross Fixed Capital Formation (GFCF): Increased to 30.8% of GDP in FY24, up from the pre-pandemic average of 28.9% (2015-2019).
- Drivers of Growth: Government capex push and household investments in residential dwellings.
Challenges in Capex Momentum
- Slowdown in Public Capex:
- H1FY25 Data
- Central government capex fell by 15.4% YoY.
- State government capex declined by 10.5% YoY.
- Central Public Sector Enterprises (CPSEs) reported a 10.8% decline, achieving only 43.6% of their annual target.
- Reasons: Disruptions due to multiple elections and cautious spending amid economic challenges.
- Private Sector Capex
- Headwinds
- Global policy uncertainties and geopolitical risks.
- Oversupply from China.
- Increased borrowing costs and muted domestic demand.
- Hope for Recovery: Expected monetary policy rate cuts and Union Budget support may boost private capex.
Government Initiatives to Boost Capex
- Interest-Free Loans to States
- FY25 allocation increased to Rs 1.5 trillion (up from Rs 1.3 trillion in FY24).
- Conditions: Rs 550 billion is unconditional, while the rest is tied to industrial growth, land reforms, and state capex growth.
- Utilisation Concerns: States used only Rs 1.1 trillion of the Rs 1.3 trillion allocated in FY24.
- Capex as % of GDP
- Central Capex: More than doubled from 1.6% of GDP in FY19 to 3.4% in FY25.
- State Capex: Expected to grow modestly to 2.6% of GDP in FY25, exceeding pre-pandemic levels.
Sectoral Capex Trends
- Capital Goods Sector
- Order Books: Grew by 23.6% in FY24, compared to a CAGR of 4.5% in the preceding four years.
- H1FY25 Growth: 10.3% increase compared to FY24, indicating healthy momentum.
- Infrastructure Sector
- FY24 Challenges: Aggregate order books for road development companies declined by 15%.
- FY25 Recovery: 20.5% growth in new orders in H1FY25, driven by public sector projects, especially from state governments.
FDI (Foreign Direct Investment) Trends
- Gross FDI inflows have performed well as of FY25 year-to-date
- Gross FDI inflows stand at $48.6 billion, higher than $42.1 billion in the comparable period of last year.
- Higher repatriation of profit has resulted in muted FDI inflows on a net basis.
- This and the recent outflow of FPIs increase depreciation pressure on the rupee.
Way Forward
- Public Capex Recovery
- Expected to pick up in H2FY25 post-election disruptions.
- Vigilant monitoring of capex deployment is crucial.
- Private Capex Revival
- Dependent on global and domestic policy support.
- Union Budget 2025 and monetary policy easing could provide a boost.
- Infrastructure and Capital Goods Sector
- Positive momentum in order books signals potential for increased capex.
- Public sector projects, especially from state governments, are driving growth.
Conclusion: The current economic environment necessitates vigilant monitoring of capex trajectory. The vital interplay between public investment and growth will need careful navigation to harness the potential of India’s burgeoning economy.