a) The other debt issue: on the States’ finances

For the first time in 11 years, in 2015-16 the combined fiscal deficit of India’s 29 States as a proportion of the size of their economies breached the 3% threshold recommended as a fiscally prudent limit by successive Finance Commissions. The Reserve Bank of India has warned that the States’ expectation to revert to the 3% mark in their 2016-17 Budgets may not be realised, based on information from 25 States. While the Central government has projected a fiscal deficit of 3.2% of GDP for this year, States expect to bring theirs down further to 2.6% — still higher than the average of 2.5% clocked between 2011-12 and 2015-16. Whichever way one looks at it, the steady gains made in States’ finances over the past decade seem to be unravelling. Chief Economic Adviser Arvind Subramanian has asserted that the 3% of GDP benchmark for the fiscal deficit of the States or the Centre is not a magic number. Yet, it serves as an anchor for fiscal discipline in a country whose two biggest crises in recent decades — the balance of payments trouble in 1991, the currency tumble in 2013 — were precipitated by fiscal irresponsibility. Taking on the massive debt of their chronically loss-making power distribution companies, as part of the UDAY restructuring exercise steered by the Centre, has surely dented the States’ fiscal health significantly over the past couple of years. With private investment remaining elusive, the States’ focus on bolstering capital expenditure in sectors such as transport, irrigation and power is welcome (States’ capital expenditure as a proportion of their GDP has been higher than the Centre’s since 2011-12). But it is important that such funding remains sustainable and States stay solvent. Tepid economic growth hasn’t helped, and States have had to resort to higher market borrowings even after the Centre hiked their share from tax inflows to 42% from 32%, starting 2015-16. The Centre has been short-changing States by relying on special levies such as surcharges, cesses and duties that are not considered part of the divisible tax pool. So, instead of a 10% rise in the States’ share of gross tax revenue, the actual hike in 2015-16 was just 7.7%. The forthcoming Goods and Services Tax regime should, it is to be hoped, correct this anomaly to an extent. But there are other potential stress points: Pay Commission hikes, rising interest payments, the unstated risks from guaranteeing proxy off-budget borrowings by State enterprises, and the boisterous clamour for ad hoc loan waivers. The N.K. Singh panel on fiscal consolidation has recommended a focus on overall government debt along with fiscal deficit and a 20% debt-to-GDP ratio for States by 2022-23. Not just the Centre, but States (with outstanding liabilities to GDP of around 24% as of March 2017) also need to tighten their belts considerably from here, even as they await the constitution of the Fifteenth Finance Commission.

b) High-stakes battle: on the Iran elections

With Iranians going to the polls on Friday to elect a President, the odds appear to be in favour of the incumbent, Hassan Rouhani. Since the 1979 Revolution, all but the first President of the Islamic Republic, who had been impeached, have served two terms. Mr. Rouhani is particularly popular among the reformist section of the electorate, and is seeking to return to office on a clear political platform of integrating Iran further with the global order and initiating reforms at home. Still, his victory in the first round, for which he needs more than 50% of the vote, is far from certain. In 2013, after eight years of Mahmoud Ahmadinejad’s rule, which saw Iran’s international isolation grow and repression at home harden, voters across the spectrum rallied behind Mr. Rouhani. He had promised to break Iran’s isolation, resolve the nuclear crisis through diplomatic means and turn that into economic benefit for all citizens. He delivered on some of those promises. He clinched the nuclear deal and oversaw greater Iranian engagement on the world stage. But he has yet to make good on his goal of attracting foreign direct investment and modernising the economy. It is partly not in his hands. International companies and banking giants still shy away from making deals with Tehran. Though the UN-mandated sanctions on Iran were lifted after the nuclear deal, the non-nuclear sanctions imposed by the U.S. are still in place. The expected thaw in relations between Washington and Tehran did not take place in the wake of geopolitical tensions in West Asia. Worse, the Trump administration’s anti-Iran rhetoric is not only scaring off western investors but also playing it into the hands of the hardliners in Iran.

The hardliners now see an opportunity to take back power from the “elitist” Mr. Rouhani. Ebrahim Raisi,a cleric and a former aide of the Supreme Leader, Ayatoaalah Ali Khamenesi, is Mr.Rouhani’s main rival. Though Mr. Khamenei has not openly endorsed any candidate, the clerical establishment’s preference is no secret. The Iranian presidency is not a strong institution compared to other presidential systems. In the Islamic Republic, real power lies with the Supreme Leader, who is not directly elected by the people. Nonetheless, the office of the President lends credence to the country’s theocratic system, and a visionary, popular leader can manoeuvre within the limitations and push his agenda gradually. Mohammad Khatami, one of Mr. Rouhani’s predecessors, tried to do so, with limited success. Though his first term was not flawless, Mr. Rouhani has demonstrated that he is capable of navigating through Iran’s complex power dynamics, perhaps more efficiently than Mr. Khatami could. It is now his chance to convince voters to give him one more term so he can continue this gradualist but substantive reform agenda.


1) Breached

Meaning: An act of breaking a law, promise, agreement, or relationship.

Example: They breached the agreement they had made with their employer.

Synonyms: Disobey, Violate

Antonyms: Agree, Allow

2) Unravelling

Meaning: If a process or achievement that was slow andcomplicated unravels or is unravelled, it is destroyed.

Example: As talks between the leaders broke down, several months of careful diplomacy were unravelled.

Synonyms: Unfold, Resolve

Antonyms: Question, Wonder

3) Benchmark

Meaning: A level of quality that can be used as a standard when comparingother things.

Example: Her outstanding performances set a new benchmark for singers throughout the world.

Synonyms: Criterion, Standard

Antonyms: Guess

4) Tumble

Meaning: To fall quickly and without control.

Example: At any moment the whole building could tumble down.

Synonyms: Drop, Slump

Antonyms: Ascend, Rise

5) Steered

Meaning: To control the direction of a vehicle.

Example: She carefully steered the car around the potholes.

Synonyms: Escort, Drive

Antonyms: Abandon, Obey

6) Elusive

Meaning: Difficult to describe, find, achieve, or remember.

Example: The answers to these questions remain as elusive as ever.

Synonyms: Evasive, Mysterious

Antonyms: Definite, Honest

7) Bolstering

Meaning: To support or improve something or make it stronger.

Example: More money is needed to bolster the industry.

Synonyms: Help, Support

Antonyms: Block, Discourage

8) Levies

Meaning: An amount of money, such as a tax, that you have to pay to agovernment or organization.

Example: They imposed a five percent levy on alcohol.

Synonyms: Tariff, Custom

9) Boisterous

Meaning: Noisy, energetic, and rough.

Example: A group of boisterous lads.

Synonyms: Clamorous, Unruly

Antonyms:Calm, Quiet

10) Incumbent

Meaning: Officially having the named position.

Example: The incumbent president faces problems which began many years before he took office.

Synonyms: Compelling, Obligatory

Antonyms: Unnecessary

11) Impeached

Meaning: To make a formal statement saying that a public official is guilty of a serious offence in connection with their job.

Example: The governor was impeached for wrongful use of state money.

Synonyms: Denounce, Censure

Antonyms: Absolve, Exonerate

12) Reformist

Meaning: Someone who tries to improve a system or law by changing it.

Example: The Guardian Council first barred the reformist candidate from running for presidency.

Synonyms: Progressive, Enlightened

Antonyms: Intolerant, Limited

13) Clinched

Meaning: to finally get or win something.

Example: I hear he finally clinched the deal to buy the land he wanted.

Synonyms: Assure, Conclude

Antonyms: Delay, Disprove

14) Endorsed

Meaning: To make a public statement of your approval or support for something or someone.

Example: The Council is expected to endorse the committee’s recommendations.

Synonyms: Approved, Signed

Antonyms: Discouraged, Cancelled

15) Credence

Meaning: the belief that something is true.

Example: I’m not prepared to give credence to anonymous complaints.

Synonyms: trust, acceptance

Antonyms: denial, doubt

16) Manoeuvre

Meaning: A movement or set of movements needing skill and care.

Example: Reversing round a corner is one of the manoeuvres you are required to perform in a driving test.

Synonyms: Exercise, Activity