Editor’s Note: The co-author of the following article, Dr. P. Sekhar passed away on January 29, just prior to the publication of his last articles for New Europe and was the Chairman of the Global Smart Cities Panel, Micro-Tech Global Foundation. Dr. Sekhar has spent the last decade giving shape to his concept of “Secured Governance”. During his career, he assisted various industries to efficiently use the latest innovative technologies. Dr Sekhar was the advisor to the Indo-American Chamber of Commerce and the Indo – African Chamber of Commerce & Industry.

India’s debt burden as a percentage of gross domestic product jumped to 605% for the financial year 2021, mainly on account of the ongoing Covid–19 Pandemic.

The nationwide lockdowns imposed to curb the spread had pushed the Indian economy into its first-ever technical recession with two successive quarters of negative growth. However, as cases reduced around November 2020, the Q3 GDP numbers lifted the economy out of this recession.

As sentiments seemed to be improving, the country was hit by a second and more severe Covid wave which put immense pressure on the heath and public infrastructure. Eventually, the government announced various measures as part of its Atmanirbhar Package – some new ones – thereby putting huge pressure on its finances.

In May of last year, the government had announced that it would increase its gross market borrowing for the financial year 2021 by more than 50% to INR. 12 lakh crores from INR. 7.8 crore budgeted earlier. The rising debt burden, therefore, has led to numerous questions from the opposition – who are quite certain that the government will not be able to meet its fiscal deficit targets for this year.

India’s total debt burden as a percentage of GDP had jumped from 51.6% in FY20 to 60.5% in FY21. The debt levels have witnessed a massive surge owing to the center’s increased borrowings to deal with the Covid – 19 Pandemic. Total debt comprises both external as well as internal debts and accounts for other liabilities. India’s external and internal debt both witnessed a surge during the past couple of years on account of an increase in the gap between expenditures and receipts.

External debt Position

At the end of March 2021, India’s external debt was placed at $570 billion, recording an increase of $11.5 billion over its level at the end of March 2020. 

The external debt to GDP ratio rose to 21.1% as of March 2021 against 20.6% a year ago.

External debt is the money that a country borrows from a source external to it and has to be repaid in the currency in which it was borrowed. Mainly such money is borrowed from institutions like foreign commercial banks and international financial institutions such as the International Monetary Fund (IMF), World Bank, Asian Developments Bank (ADB) and also from the governments of foreign nations. Commercial borrowings comprised the largest component of external debt, with a share of 37.4%, followed by non–resident deposits at 24.9% and short–term trade credit at 17.1%. A major portion of India’s external debt came from multilateral institutions. A major portion of India’s external debt came from multilateral institutions.

Repayment of External Debt

Data by the Reserve Bank showed that debt service, that is, principal repayments plus interest payments, soared to 8.2% of the current receipts by March 2021. The figure stood at 6.5% at end of March 2020. This reflects higher repayments by India and lowers current receipts. As per talk in Parliament stated that India had repaid INR. 34,715 crore towards its external debt in the financial year 2020 – 21.

Internal Debt in India

India’s internal debt comprises loans raised in the open market, compensation, other bonds, and more such instruments. It also includes borrowings through treasury bills including treasury bills issued to state governments, commercial banks, and other investors, as well as non–negotiable, non–interest bearing rupee securities issued to international financial institutions. As of March 2021, the internal debt stood at INR. 9,583,366 crores which are about 19.5% higher than the previous year. In terms of debt to GDP ratio, it stood at a massive 48.5%. It had jumped by 13.4% to INR. 8,020, 490 crores in 2019 – 20. 

India’s Fiscal Position

The central government’s fiscal deficit stood at INR. 2.74 lakh crore or 18.2% of the full year’s Budget estimate at the end of June, according to data released by CGA. The fiscal deficit at the end of June 2020 was 83.2% of the Budget Estimates (BE) of 2020 – 21.  In absolute terms, the fiscal deficit was at INR. 274,245 crores at the end of June. For the current financial year, the government expects the fiscal deficit at 6.8% of GDP or INR. 1,506,812 crore. The fiscal deficit or the gap between expenditure and revenue for 2020 – 21 was 9.3% of the GDP, better than 9.5% projected in the revised estimates in the Budget in February.

Debt position of the Government of India

The outstanding internal and external debt and other liabilities of the Government of India at the end of 2021-2022 is estimated to amount to INR. 13,586,975.52 crore, as against INR. 12,121,959.24 crore at the end of 2020-2021. Broad details are as follows: 

Internal Debt comprises loans raised in the open market, compensation and other bonds. It also includes borrowings through treasury bills including treasury bills issued to State Governments, Commercial Banks, and other Investors, as well as nonnegotiable, non-interest-bearing rupee securities, issued to International Financial Institutions. An analysis of the public debt outstanding at the beginning of the First Five Year Plan and close of each year from 2016-2017 to 2019-2020 and that estimated to be outstanding at the close of 2020-2021 and 2021-2022 is given in the Statement of Liabilities.

The amount outstanding under internal and external debt reflects the liability of the government as represented by the book value of the outstanding debt. The outstanding stock of external liabilities is reckoned at historical rates of exchange on which the liability was initially accounted for in the books of accounts after netting the repayments made at current exchange rates.

In addition, Government is liable to repay the outstanding against the various Small Savings schemes, Provident Funds securities issued to Industrial Development Bank of India, Unit Trust of India and Nationalised Banks, Oil marketing companies, Fertilizer companies, Food Corporation of India and deposits under the Special Deposit Scheme and depreciation and other interest-bearing reserve funds of departmental commercial undertakings, etc., deposits of local funds and civil deposits. Details of such liabilities are shown in the Statement of Liabilities.

Turning wasteland into smart cities for a sustainable economic growth 

Due to lack of irrigation, or unfavorable climate, some lands are not cultivated and are categorized as either culturable or unculturable wastelands. Culturable wastelands include gullied and/or ravenous land, undulating upland, surface waterlogged land and marsh, salt-affected land, shifting cultivation area, degraded forest area, degraded non-forest plantation, sandy area, mining and industrial wasteland, and pasture and grazing lands. Compared to this, unculturable wastelands include barren, rocky, stony wastes, sheetrock areas, steep sloping and snow-covered and/or glacial areas.

People friendly action program helps local people and organisations in rehabilitating and improving the degraded lands. “Turning wasteland into a successful ‘Smart city’” the wasteland in India which has been abandoned is being transformed into a Smart City for sustainable economic growth. The municipality of the Indian state government will be responsible for providing the necessary public facilities, while private enterprises and knowledge institutes invest and erect the real estate and the use of public space for critical sectors and other socio–economic activities. 

Nowadays, India’s acute housing shortage and rapid urbanization have prompted many economists to prefer more farmland available for housing. This loss of farmland is a direct result of remarkable success in economic development over the past two decades, which has resulted in rapid urbanization and the conversion of enormous amounts of farmland into residential, industrial, commercial, infrastructure and institutional uses. We need to consider the negative side of farmland losses in this country. The farmland loss may not seem significant in the short term but added up over the course of decades these losses could have serious effects on the resource base for our food supply. If continued, these high rates of high-productivity farmland loss will have significant impacts on the annual yields of agriculture production.

Negative consequences with the conversion of farmland include losses in food production, environmental benefits, and social benefits. With today’s level of agricultural surpluses in this country, it is hard to argue that the current rates of farmland conversion will be detrimental to our food supply. However, this may change in the future. 

Other negative consequences of farmland conversion include reductions in environmental and social benefits. These environmental benefits include flood control, air quality, habitat for wildlife and native vegetation, and groundwater recharge areas. Social benefits provided by farmland include open space and scenery as well as recreational opportunities such as hunting, fishing, hiking, and photography. Farms make up an important foundation of many regions tourist industry.

The secured governance concept is to create a model which demonstrates value both within and outside the city. The government approved formula that gives equal weight to population and the number of “statutory towns” in each state. Accordingly, Uttar Pradesh will be eligible to build 13 smart cities, followed by Tamil Nadu 12 and Maharashtra 10. India will be one of the last major countries in the world to experience the urbanization of its population. Population census data revealed a notable demographic tilt in favour of urban, for the first time, in 2011. During the decade 2001-11, the growth of India’s urban population was slightly higher than that of the rural. Around 35.0% of the population is urban (483.1 million people in 2020). The National Commission on Population (NCP) in India predicts that in the next 15 years (i.e., by 2036), about 38.6% of Indians (600 million) will live in urban areas.

The UN, too, highlights that India’s urban population size will nearly double between 2018 and 2050, from 461 to 877 million. The smart city idea behind creating them is to enhance human economic and social well-being and to reduce costs and resource consumption. Collectively, the city has to work for all its citizens. A city must be a place where its citizens can live, work, and thrive.

Today, India’s top 10 cities occupy 0.1% of the total land area, and its top 100 cities occupy 0.26% of the land. This land area will need to expand as more people come to live in cities, and it will be important to ensure expansion happens efficiently. Land management will be a critical element of the smart cities program.

The total wasteland area of the country was observed to be 557,665.51 square kilometers (16.96 % to TGA) in 2015-16, while it was 566,070.36 square kilometers in 2008-09 (17.22%). During this period 14,536 square kilometers of wastelands are converted into non-wastelands categories. There is a net conversion of 8,404.86 square kilometers (0.26 %) of different wasteland categories in the country during 2008-09 to 2015-16.

A reduction in wastelands area was observed in the categories of land with dense scrub, waterlogged and marshy land, sandy areas, Degraded pastures/grazing land and gullied and/or ravenous land. There are 200 square kilometers of land area would be enough for a smart city. Those 100 smart cities occupy around 20,000 sq. km. of the total land area. Only 4.23% of wasteland would be required from the total wasteland. 

The main objective of the secured governance concept is to develop a deprived land area into a dynamic creative zone, where knowledge, innovation, culture, and creativity meet and mutually reinforce.

Secured Governance strategy plan for the islands 

Secured Governance presents a vision of rapid economic development based on natural resource utilization and blue economy implementation through the next five years. Secured Governance offers a strategy for the government to get all the basic infrastructure development with a negligible investment by the government. Island and inland water bodies are expected to gain more from the blue economy orientation in their development policies. 

Smart city concepts demand a change in lifestyle and can only be successful if the people are willing to adapt to this new lifestyle. The social and cultural settings in islands are known to be different; islanders often have a unique lifestyle shaped by various factors such as physical isolation, size etc. Therefore, if authorities want to create smart islands, they need the people to be among the most important stakeholders, that is, they need the people to want to live in a smart island.

Many people use the island is for water sports, beach parties and meeting new people. For some it is the dream place for lazy days, hanging hammocks and a nice book. And for the rest, it is about long walks, beautiful sunsets, and equally enchanting sunrises. Whichever way, we associated them with several good and rejuvenating things; however, overly commercialized beaches with murky water are a big turn off.

The Smart City Scheme is an ambitious economic development program aimed at consolidating the Indian international business and financial HUB by creating ideal conditions for working, living and spurring investment through the development of smart cities in all 1,208 islands. The smart city project is a new initiative to stimulate innovative scientific and technological activities, provide technology-driven facilities to the business community and create a vibrant city lifestyle.

The Blue Economy concept is a tool to implement Smart City development on the islands for the economic growth of the nation. The final goals are not just economic growth and quality of life for all people, but sustainable smart cities while ensuring that it meets the needs of present and future generations with respect to economic, social, environmental as well as cultural aspects.

Blue Economy is comparatively unexplored in terms of its economic potential and long-term development program of the world. Island could be one of the major destinations in the journey of creating a smart sustainable city. 

These new smart cities will be constructed around the work-live-play lifestyle in a vibrant environment with technology and the cities aspire to be clean and green while some want to leverage heritage and other unique features.

These smart city projects would require a huge capital investment that initially could be brought about by public-private partnerships for developing sustainable smart cities. The smart cities on the islands will help the Indian Economy to provide long term funding and more employment opportunities in future.

Value and the valuation of Blue Economy-allied projects will make it a self-sustaining mechanism while bringing unprecedented growth and development for the region.

These islands represent an opportunity to boost the local economy and create huge employment opportunities in knowledge-intensive economic sectors. The development of smart cities on India’s islands could be a plethora of investment opportunities and assist to meet the financial obligations of the nation.

It is important to understand the crucial role played by the global and national debt for the overall growth. These are projected as doomsday numbers but in reality, they are prosperity index as these are not owned to majorly to any outside entity but taken within the system. These are increasing by the day because of the investing capacity of the people which is the indication of growth. But since these appear as debt in every nation, including India’s budget, can be strategically removed or nullified through Secured Governance Self sustained growth doctrine. 

From the Indian scenario, the many development projects in the smart cities down to the village level, in the wastelands and the islands, which would be in the trillions of dollars, should have financial instruments like bonds issued and offered against the debt with provision to cash when the value goes above the invested amount. 

This would have a win-win relationship with the National growth and the internal investments which are now standing as debt going as development bonds giving higher returns. By this, the present conventional national and global debt becomes an index of progress, prosperity, and happiness. India should take lead in getting rid of all debts in state and central budgets through this unique techno-economic growth engine through Smart and Secured Governance. Other countries can follow this.  

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By: Nicholas Waller
Title: India should rid itself of all debts through smart and secured governance
Sourced From: www.neweurope.eu/article/india-should-rid-itself-of-all-debts-through-smart-and-secured-governance/
Published Date: Wed, 02 Feb 2022 18:13:03 +0000

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