National Infrastructure Pipeline

Mains-GS-3-Economic Development, Prelims- Economy

1. The Task Force on National Infrastructure Pipeline (NIP) submitted its Final Report on NIP for FY 2019-25 to the Union Minister for Finance.

2. Union Finance Minister in the Budget speech 2019-20 announced that Rs. 100 lakh crore would be invested in infrastructure over the next five years.

About NIP

1. NIP is a first-of-its-kind, whole-of-government exercise to provide world-class infrastructure across the country and improve the quality of life for all citizens.

2. It aims to improve project preparation, attract investments (both domestic and foreign) into infrastructure and will be crucial for the target of becoming a $5 trillion economy by FY 2025.

3. The NIP has been made on a best effort basis by aggregating the information provided by various stakeholders including line ministries, departments, state governments and private sector across infrastructure sub-sectors identified in the Harmonised Master List of Infrastructure.

4. A bottom-up approach was adopted with all projects (Greenfield or Brownfield, Under Implementation or under conceptualisation) costing greater than Rs 100 crore per project were captured.

Final Report

1. The report projects total infrastructure investment of Rs 111 lakh crore during the period FY 2020-25 based on new additional/amended data provided by Central Ministries/State Governments.

2. Sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to around 71% of the projected infrastructure investments in India. The Centre (39%) and States (40%) are expected to have an almost equal share in implementing the NIP, followed by the private sector (21%).

3. It identifies and highlights recent infrastructure trends in India as well as global in all sectors of infrastructure.

4. It also captures sector progress, deficits and challenges. It identifies and highlights a set of reforms to scale up and propel infrastructure investments in various sectors throughout the country.

5. It has suggested ways and means of financing the NIP through deepening Corporate Bond markets, including those of Municipal Bonds, setting up Development Financial Institutions for the infrastructure sector, accelerating Monetisation of Infrastructure Assets, Land monetisation, etc.

6. The Task Force has recommended setting up of three Committees:

a. A Committee to monitor NIP progress and eliminate delays,

b. A Steering Committee in each Infrastructure ministry level for following up implementation and

c. A Steering Committee in DEA for raising financial resources for the NIP.

Database

1. The NIP project database would be hosted on India Investment Grid (IIG) to provide visibility to the NIP and help in its financing with prospective domestic and foreign investors able to access updated project level information.

2. Each line Ministry/State would further add new projects and update their respective project details at pre-defined time intervals for making updated data available to prospective investors.       

Source: PIB

Read More

Exchange Rate

Mains-GS-3-Economic Development, Prelims- Economy

1. The economic disruption due to the spread of the COVID-19 has adversely affected various aspects of the Indian economy.

2. Other than the growth rates of gross domestic product and gross value added, high-frequency data like sales of automobiles, etc. could also indicate the problems.

3. The exchange rate of the rupee is one such data on the state of the Indian economy’s competitiveness.

What is the currency exchange rate?

1. A currency’s exchange rate vis-a-vis another currency reflects the relative demand among the holders of the two currencies.

2. This demand depends on the relative demand for the goods and services of the two countries.

3. A stronger US dollar than the rupee shows the demand for dollars by those holding rupee is more than the demand for rupees by those holding dollars.

Trade-Weighted Indices

1. Stronger economies have stronger currencies. For instance, as the US economy is relatively stronger than India’s, one US dollar equals to around 76 rupees.

2. The rupee has been losing value (or depreciating/weakening) against the dollar over the past few months.

3. But as India trades with many other countries as well, the economy’s overall competitiveness will be based on rupee’s relation with currencies of all major trade partners.

Which measures are to be looked at?

1. RBI tabulates the rupee’s Nominal Effective Exchange Rate (NEER) in relation to the currencies of 36 trading partner countries. This is a weighted index as greater weight is given to countries with which India trades more.

2. A decrease in this index denotes depreciation in rupee’s value and an increase reflecting appreciation.

3. In NEER terms, the rupee has depreciated to its lowest level since November 2018. The steady loss of rupee’s value shows reduced competitiveness of the Indian economy since July 2019.

4. The recent dip was influenced by the net outflow of foreign portfolio investments from the Indian equity and debt markets.

How does inflation affect exchange rates?

1. Many factors affect the exchange rate between any two currencies ranging from the interest rates to political stability (less of either result in a weaker currency).

2. Inflation is one of the most important factors.

3. If the Indian inflation is 20% and the US inflation is zero, then in the second year, an Indian would need Rs 120 to buy the same item priced at $100, and the rupee’s exchange rate would depreciate to 1.20.

Where does REER stand?

1. Real Effective Exchange Rate (REER) is an improvement over the NEER as it also takes into account the domestic inflation in the various economies.

2. Even in REER terms, the rupee has depreciated and fallen to its lowest level since September 2019.

3. The difference between trends of NEER and REER was due to India’s domestic retail inflation being lower relative to the other 36 countries.

4. As domestic inflation started rising, the REER, too, started depreciating like the NEER.

Read More