Type: op-ed snap


FDI in Indian economy Finance and Banking

[op-ed snap] Red tape herring?

source

Note4Students:

Mains Paper 3: Economy | Growth

The Modi government came to power by giving an election promise of ‘Minimum Government, Maximum Governance’. All eyes are now on government that how willing it is and what measures it is taking to fulfill that promise. Read the op-ed to gain insights about FDI approval processes and other related measures.

From UPSC perspective, following things are important:

Prelims level: FIPB, Anti corruption law and FDI limits in various sectors of economy.

Mains level: What are the factors that lead to delays in decision making process in government, how can this be resolved and other related topics.


 News:

  1. As promised in Budget speech, The Union Cabinet has approved ‘phasing out’ of the Foreign Investment Promotion Board (FIPB)

What will be modus operandi now?

  1. The Department of Industrial Policy and Promotion under the Commerce Ministry is now expected to formulate a standard operating procedure to process foreign direct investment applications in 11 sectors that are still not in the automatic FDI approval list
  2. The department would have to be consulted by line ministries, which have been empowered to take ‘independent’ decisions on investments proposed in their domains

End of red tapism:

  1. Government belief- The government believes that once FIPB is history, red-tapism will shrink, ease of doing business will improve and investors will find India more attractive
  2. Present scenario- But over 90% of investment flowing in country already does not require an FIPB nod as it comes in through the automatic route, so decision is more symbolic in nature
  3. Litmus test- The efficacy of this move will be determined by the ability of individual ministries (and sectoral regulators which may be involved in the ultimate decision) to exercise ‘discretionary’ powers without fear, favour or the cover provided by a collective decision-making body

Cautious Bureaucracy:

  1. Bureaucrats are likely to remain cautious till the government carries out changes it has promised to the anti-corruption law to protect them from the wrath of auditors and investigative agencies for bona fide decisions taken in the line of duty
  2. This may cause delay in taking decisions

Reason may be cumbersome rules, not the FIPB:

  1. Cumbersome rules, not the FIPB, have been responsible for a less than enthusiastic response from foreign investors in some sectors
  2. Global insurers can hold up to 49% ownership in Indian ventures but only if Indians retain management and control over these entities — this is an onerous definition of control that has inhibited deal-making
  3. Despite allowing 100% FDI in food retail, rules prohibit foreign players from using a small fraction of their shelf space for non-food items, affecting investment plans
  4. Archaic land acquisition and labour laws continue to make it difficult for large factories to come up.

B2B

  1. The Foreign Investment Promotion Board (FIPB)is a national agency of Government of India, with the remit to consider and recommend foreign direct investment (FDI) which does not come under the automatic route. It acts as a single window clearance for proposals on foreign direct investment (FDI) in India. The Foreign Investment Promotion Board (FIPB) was housed in the Department of Economic Affairs, Ministry of Finance. FIPB will be abolished in financial year 2017-18, as announced by Finance Minister Arun Jaitley during 2017-2018 budget speech in Lok Sabha.
NITI Aayog : The New Development Agenda Indian Polity

[op-ed snap] NITI Aayog and the emperor’s clothes

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Note4Students:

Mains Paper 3: Economy | Indian Economy Issues relating to planning

NITI Aayog was seen as a new ray of hope that would totally transform policy making scenario and bring the country out of the Soviet influenced planning processes. But NITI Aayog hasn’t been able to fulfill all such hopes. The op-ed discusses all such issues and can be bookmarked to be used in Mains answers.

From UPSC perspective, following things are important:

Prelims level: NITI Aayog, Its structure, mandate and other related topics.

Mains level: What are the issues that have been making NITI Aayog a near replica of Planning commission, what are the changes required and way forward.


Context:

  1. One of the key decisions taken by the government on assumption of office was to dismantle the Planning Commission, and replace it with a new body, the National Institution for Transforming India (NITI) Aayog
  2. NITI Aayog was expected to act as the principal government think tank and adviser to the Prime Minister on key policy issues, which can really transform India

Expectations unfulfilled:

  1. Issues with Planning Commission- The Planning Commission was a non-legislative body, with significant powers to allocate finances to states, but marred by bureaucratic processes and devoid of fresh thinking
  2. Main reason of failure- It failed to keep its ear to the ground, and did not take into account the divergent demands and capacities of states
  3. The creation of NITI Aayog was expected to be a game changer, to infuse new vigour and rigour in the policy planning process, involve key stakeholders, and address the failures of the previous plan body
  4. Anticipations- It was anticipated that it would prioritize the challenges faced by the economy and hit the ground running to address them in a transformational manner
  5. Work done- During the last two-and-a-half years, NITI Aayog has worked on several agendas, such as the promotion of digital payments, reforms in agriculture, education and railways, helping states undertake social sector reforms
  6. Autonomy still not available? While all these issues were important, and the suggestions made by NITI Aayog critical, it appears that the institution’s agenda and priorities are being set by government diktat rather than an organic, independent thought process
  7. Less clarity- For instance, while recognizing the importance of competition, it walked with the government on promoting digital payments through select entities, and kept mum when government policies distorted competition
  8. Work that remains to be done- NITI Aayog is yet to institutionalize a checks and balances mechanism to caution the government about the claims it makes, and apprise policymakers of the ground realities

Three-year action agenda- better than five year plans?

  1. NITI Aayog recently released a draft three-year action agenda, which is part of a 15-year vision and seven-year strategy document, which are yet to be released in public domain
  2. What is covers? The action agenda covers a wide range of issues, including the fiscal framework, agriculture, industry, services, transport, digital connectivity, public private partnership, energy, science, technology, governance, taxation, competition, environment, forests and water
  3. What is actually expected? When dealing with imminent challenges, such a wide-ranging approach is not expected
  4. For example, while covering pertinent issues and providing important recommendations such as “Price Deficiency Payment” to remove distortions in the existing minimum support price mechanism in the farm sector, there is limited clarity on how, by whom, and the timelines within which such suggestions would be implemented
  5. Collation of several policy-related recommendations- The action agenda appears more like a document collating several policy-related recommendations provided by experts and government-formulated committees over the years
  6. Good ideas would remain on paper- It puts limited or negligible focus on implementation challenges, bureaucratic reforms and government-citizen interaction, which is core to several good ideas remaining on paper and being left unimplemented

What should have been done?

  1. Rather than focusing on policy-level recommendations, NITI Aayog would have done better had it dealt with implementation-related challenges
  2. Steps that were needed- A clear action agenda on how policies should be implemented, the creation of a feedback loop, taking into account changes on the ground, and fixing accountability of babus, would have been welcome
  3. It should have focused on process reforms
  4. Cost-benefit analysis- Costs of implementing recommendations like creation of coastal employment zones must be compared with expected benefits in the medium term.

B2B

 

The cycles of distress in Indian agriculture

Note4students

Mains Paper 3: Agriculture | Land reforms in India

From UPSC perspective, following things are important:

Prelims level: Peasants agitations in Modern History

Mains level: Article gives an historical overview of Problems faced by Indian Farmer.

News

Context

  1. Article provides a brief historical background about Indian agriculture

Anniversary of Two famous agitations(anniversary of any historic event means it becomes a hot topic for both UPSC prelims and mains exam).

  1. It is now 100 years since Mahatma Gandhi mobilized the indigo cultivators of Bihar’s Champaran district
  2. It is also 50 years since the peasants of Naxalbari in West Bengal began their violent uprising against landlords

Other Peasant Revolts in Indian Modern History

  1. Modern Indian history has been marked by several peasant revolts that were based on underlying economic fault lines
  2. The Deccan riots in the mid-19th century were perhaps the first challenge to colonial rule since 1857
  3. It is useful to remember that at least two of the major political movements launched by Gandhi were timed with a massive deflation in the prices of agricultural commodities—after World War I, and then during the Great Depression

Why has India not seen similar episodes in the past few decades?

  1. There are two possible interlocking reasons.
  2. First, Indian agriculture has moved on from feudalism. The tight hold that landlords had over peasants has eased
  3. The possibilities of getting non-farm jobs in the rural areas on the one hand, and migration to cities on the other has also contributed in stopping these kinds of peasants uprising.
  4. Second, the Indian state has, since the Green Revolution, taken at least some of the risk out of agriculture by providing farm inputs at subsidized costs as well as providing guaranteed prices for certain types of farm produce
  5. The major farmer or peasant protests since the 1980s have thus been focused on getting more benefits from the government rather than making any fundamental changes in the way agriculture is organized

The Way Forward

  1. The system of state support is now buckling under fiscal pressure
  2. There is little offered by way of alternatives
  3. One alternative is to reduce the number of people employed in agriculture,  as argued by B.R. Ambedkar in a brilliant academic paper he wrote in 1918.
  4. The second alternative is to free Indian agriculture from price controls, restrictions on movement of farm produce, commercial risks due to volatile prices, and the lack of access to global markets
  5. Farmers are trapped in a new cycle of distress at a time when the fiscal capacity of the government is weak.

 

 

The hazards of farm loan waivers

source:

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, following things are important:

Prelims level: Not Much

Mains level: Gives an overview how farm loan waiver scheme is detrimental to the development of credit markets. This is a very important topic for Mains.

News

Context

  1. The BJP’s electoral manifesto had committed to write off loans of small and marginal farmers, which would approximately cost the government Rs37,000 crore
  2. According to initial reports. Intervention in the credit market through household debt relief has been a fiscal policy adopted by many governments both at the Central and state level for many years

Argument in support of debt-waiver programmes

  1. The support for debt-waiver programmes comes from the theoretical argument that a high level of outstanding debt reduces the incentive for the debtor to exert effort to repay
  2. However, repeated debt-waiver programmes might alter the expectations of debtors about enforcement of future credit contracts

Bad effects of Debt-waiver programmes

  1. If farmers expect governments to intervene and free their collateral from banks, in case of default, they are likely to reduce productive investments and spend more on consumption
  2. Past empirical research analysing the 2008 nationwide Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) found that it led to a delay in loan repayment, increase in defaults, and no significant productivity gains.
  3. In spite of the evidence against the effectiveness of the ADWDRS programme, many states continue to announce their own state-level debt-waiver schemes.
  4. It is possible that state-level debt-waiver schemes could address state-specific indebtedness problems that a generic national-level programme like ADWDRS could miss

Uttar Pradesh farm loan waiver scheme

  1. The Uttar Pradesh Rin Mafi Yojana (UPRMY) is one such programme that was announced immediately after the ADWDRS programme in November 2011

Consumption and investment behaviour of eligible vs non-eligible households

  1. Study finds that households which qualified for the waiver spent approximately Rs8,000 more on consumption per year than households that did not qualify for the waiver.
  2. Of greater concern is that qualifying households also spent significantly more on social events such as weddings, family occasions, and so on, even when there was no significant difference in farm productivity between qualifying and non-qualifying households
  3. Given that households in the same district face similar agricultural shocks, no improvement in farm productivity for households qualifying for loan waiver indicates a failure of the programme to achieve its desired goals

Implications for design of loan waiver programmes

  1. Research provides evidence that a blanket waiver scheme is detrimental to the development of credit markets
  2. Repeated debt-waiver programmes distort households’ incentive structures, away from productive investments and towards unproductive consumption and wilful defaults
  3. These wilful defaults, in turn, are likely to disrupt the functioning of the entire credit system

The Way Forward

  1. A well-designed loan-waiver programme could enhance the overall well-being of the households by improving their productive investments, as opposed to distorting their loan utilization and repayment patterns.
  2. One possibility is to formulate eligibility rules that depend on historical loan-utilization, investment, and repayment patterns.
  3. Another option is to explore alternative policy interventions like agricultural insurance.
  4. The desired intervention could then be the one, which nudges households into investing more now and increase long-term productivity
Environmental Conservation and Mitigation strategy Conservation & Mitigation

Missing the coastal growth opportunity

source

Note4students

Mains Paper 3: Environment | Conservation, environmental pollution and degradation, environmental impact assessment

From UPSC perspective, following things are important:

Prelims level: What are CRZs, particulars of Environment protection act

Mains level: Important for both environment and development point of view. Article shows how wrong implementation of environment laws can obstruct development projects.

News

Context

  1. Article talks about how Coastal Regulation Zone norms are an example of a top-down, heavy-handed, legislative diktat from Delhi that ignores local dynamics
  2. Burdensome laws, accompanied by the onerous rules and regulations they impose, restrict economic activity in the entire country
  3. Due to these, India’s coastal regions have witnessed tepid growth in terms of size and economy.

Suffering due to the Environment (Protection) Act (EPA)

  1. The coastal regions suffer from the additional liability of having to comply with far-fetched coast protection norms originating under the Environment (Protection) Act (EPA)
  2.  Passed under the powers conferred on the Central government by Section 3 of the EPA, the Coastal Regulation Zone (CRZ) rules were first notified in 1991 and were further amended in 2011

What is CRZ?

  1. As per the norms created by the Central government, a CRZ is the land area from the high-tide line to 500m inland.

Exceptions in norms for Prohibited activities in CRZ

  1. There is a long list of proscribed activities within this zone, such as the setting up of new industries, expansion of existing industries, establishment of fish processing units, warehouses, land reclamation, etc.
  2. Although the norms carve out exceptions within these prohibited activities for certain undertakings, such as building ports or reconstructing dwelling units for local communities, it interestingly carves out a singular exception for the development of a greenfield airport proposed at Navi Mumbai.
  3. The regulation is replete with such curious exceptions to some specific cases, which raise questions pertaining to the criteria that was followed to determine permissible and non-permissible activities
  4. Going even further with the regulatory tangle created by these CRZ guidelines, the norms demarcate the zones into different numbered categories—CRZ I, CRZ II, CRZ III and CRZ IV
  5. This demarcation, it seems, is based primarily on the level of previous construction or developmental activity that’s been conducted in a region now within the regulated zone of either 500m or 100m

Issues

  1. The multiplicity of definitions, exceptions, permissible and impermissible activities not only lead to high regulatory and legal expenditure in obtaining project clearances, there is all-round confusion in implementation as well

 The execution of the CRZ rules

  1. The execution of the CRZ rules falls within the domain of several coastal zone management authorities created by the state governments for this purpose
  2. The authorities have to prepare coastal zone management plans based on the complicated regulation which also lists the guidelines that the authorities must follow in preparation of the plans

The Way Forward

  1. Even though the CRZ rules stand amended as on 6 January 2011, the new rules have done little to ease the regulatory burden imposed on a wide array of economic and development activities that may be pursued in coastal regions
  2. The Central government must assert its political will and rescind these regulations, leaving the task of administering coastal zones to the already created state coastal zone management authorities
  3. State governments in coastal regions will be better suited to devise laws concerning coast development, given their substantial political interest in the matter and superior knowledge of state goals as well as needs
  4. The Central government must restrict its role to advising state governments on the prospective benefits and costs of any regulation that the states propose
RTI – CIC, RTI Backlog, etc. Governance

[Op-ed snap] Love to hate the RTI

source:

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, following things are important:

Prelims level: Particulars of RTI Act.

Mains level: This article gives a concise explanation about the current problems of RTI implementation in India.


News

Context:

In this article the writer breaks the prevailing myth that RTI has become a tool for harassing public officials by black-mailers.

The writer divides applicants of RTI in the following categories:

  1. Those who file RTI applications with the hope of exposing corruption or arbitrariness in governance
  2. Those who file RTI applications repeatedly to correct a wrong they think has been done to them
  3. Those who use the RTI to blackmail people
  4. Those who use the Act to harass a public official to get some undue favour
  5. According to writer, the fourth category must be discouraged. Information commissioners can do this fairly easily
  6. In Writer’s experience, less than 10 per cent of the applications belong to the last two categories

Supreme Court on RTI

  1. Some years ago, the Supreme Court said the RTI “should not be allowed to be misused or abused, to become a tool to obstruct national development and integration, or to destroy peace, tranquility and harmony among citizens”
  2. The SC has also said the RTI may take up 75 per cent of an officer’s time.

issue

  1.  Public authorities are not castigated for flouting their obligations under the Act, but citizens are upbraided for exercising a fundamental right
  2. The powerful are upset with the RTI and hence, try to discredit it by talking about its misuse

The way forward

  1. India is rated among the top five nations in the world in terms of provisions of the RTI Act and ranked 66 in terms of implementation.
  2. The law must not be amended.
  3. Also, the frivolous attitude towards the Act has built the impression that the RTI needs to be curbed and activists can be targeted. This must stop.
Drought, rural distress and support to farmers Agriculture

[op-ed snap] Should agricultural income be taxed?

source:

Note4Students:

Agriculture is the backbone of rural economy of India and any major policy decision either being taken or being discussed that may affect farmers adversely is bound to cause tensions and also criticisms. Read the op-ed futrther to gain insights into agriculture sector of India and how it has been suffering since the colonial rule.

From UPSC perspective, following things are important:

Prelims level: Share of agriculture sector in GDP and workforce. Related- Various schemes for agriculture welfare.

Mains level- Causes of agricultural distress, measures adopted to resolve them and what needs to be done further.


 Context:

 

Historical Background

  1. The recent discussion on taxing farm income is nothing new
  2. This kind of thinking was doing the rounds even in British India, when as early as 1925, a committee was set up to assess the feasibility of taxing agriculture income
  3. The most famous attempt in post-Independence India was the K.N. Raj committee report of 1972, which also examined feasibility and implementation issues
  4. The Kelkar task force report of 2002 estimated that 95% of the farmers were below the tax threshold

Why this discussion has begun again?

  1. The underlying argument in the current discussion is to bring more people under the tax net to expand the tax base
  2. This may also curb tax evasion because income from other sources is usually shown as agricultural income and thus evasion is easy

Performance of Agriculture in post-reform era:

  1. Post-reform period, the relative contribution of agricultural income to India’s gross domestic product has shrunk at an alarming rate
  2. Decreased share in GDP- During the period 1991 to 2016, the share of agriculture decreased from 32% to 15%
  3. Half of India’s workforce still dependent on agriculture- The workforce dependence on agriculture is still very high, at 49.7%
  4. Dismal performance- Due to technological and environmental constraints, the performance of the agriculture sector has not been encouraging
  5. Rural areas suffer- Consequently, the welfare of the population living in the countryside (rural areas) has not visibly improved.

Theory of economic transformation:

  1. The agriculture sector is expected to serve other sectors of the economy in terms of supplying raw material, investible surpluses and human resources
  2. But quite deliberately, the terms of the trade are kept unfavourable to the agriculture sector
  3. This is the standard process followed by countries around the world, and India is no exception to this rule

Why Agriculture should not be taxed?

  1. Lack of essential services- Rural social and economic services, which ought to have been provided by the government, have been found wanting
  2. Privatisation impact- Education and health privatisation has increased the cost of rural households and the burden of all this has adversely impacted agricultural households
  3. Low income- The average per month income of a farm household in India in 2012-13 as per the National Sample Survey Office was just Rs. 6,491
  4. Farmers want to quit agriculture: The income-expenditure gap for a majority of farmers is in the negative and thus more than one-third of the farmers have expressed their choice to leave the non-remunerative occupation
  5. Rising suicides- The agrarian distress has been deepening, and there has been a rise in farmer suicides

Conclusion

Instead of finding a viable policy to solve the crisis, floating the idea of taxing farming income is a great disservice to the sector

Genetically Modified (GM) crops – cotton, mustards, etc. Agriculture

[op-ed snap] Say no to GM mustard

source:

Note4students

Mains Paper 3: Science & Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

From UPSC perspective, following things are important:

Prelims level: Basics of GM Crops Production, Indian Agencies working on this issue

Mains level: This articles gives important arguments against the GM Crops. Knowing the story of both side is important i.e. how GM crops can be beneficial and how they are harmful

News

Context

  1. The manner in which the Genetic Engineering Appraisal Committee (GEAC) recently cleared the proposal for genetically modified (GM) mustard is not compatible with BJP Manifesto(according to the Writer)
  2. Earlier, the Prime Minister had delighted consumers by lending his weight to the promotion of organic food
  3. On the other hand, GM and organic are completely incompatible

Arguments against Bt Cotton

  1. Despite increased fertilisers and irrigation, the expectations of enhanced cotton yield have not been realised
  2. Most of the countries that have higher cotton yields than India do not grow GM cotton

Yield claims on which GM mustard has been cleared

  1. These claims are based on comparisons with 30-year-old cultivars, and not on more recent high-yielding hybrids
  2. The highest yields in mustard are from the five countries which do not grow GM mustard — U.K., France, Poland, Germany and Czech Republic — and not from the GM-growing U.S. or Canada (FAO data)

Possible way of increasing mustard yield in India

  1. Mustard yield can be increased rapidly and safely  by adopting the practice of System of Mustard Intensification, for which successful trials have been done in Bihar through a World Bank project.
  2. Results showed higher yields and better income. All this without the spraying of any toxic herbicide

Arguments against GM Crops

  1. HT (herbicide tolerant) GM crops have been condemned by a number of medical professionals and other scientists for increasing chemical herbicide use, leading to serious health conditions — at all stages, but most worryingly at the foetal stage
  2. A scientific report from Argentina found a fourfold increase in birth defects and a threefold increase in childhood cancers in HT soya areas
  3. Seventeen of the 20 most developed countries — including Japan, Russia, Israel and most of Europe — refuse to grow GM crops
  4. The U.S. is a prime example of a country which has galloped into the GM mode of agriculture.
  5. Studies have shown a strong correlation between growth of GM crops, the herbicides they promote, and diseases such as acute kidney injury, diabetes, autism, Alzheimer’s and cancers in the past 20 years in the U.S.

Problems with HT GM Crops

  1. The GEAC had itself rejected a similar HT GM mustard proposal in 2002. The same reasons apply now
  2. A herbicide-tolerant crop promotes constant exposure to a single herbicide — which eventually results in weeds becoming resistant.
  3. For example, over 20 species of weeds in the U.S. are now resistant to Monsanto’s glyphosate-based herbicide
  4. Glyphosate has been declared to be a “probable human carcinogen” by the World Health Organisation.
  5. The glufosinate-based herbicide to which the proposed GM mustard is tolerant will also have adverse impacts on health

Is pesticide industry influencing policymakers?

  1. A recent report by the United Nation’s Special Rapporteur on the Right to Food, says: “Recent mergers have resulted in just three powerful corporations: Monsanto and Bayer, Dow and Dupont, and Syngenta and ChemChina. They control more than 65 per cent of global pesticide sales. Serious conflicts of interest issues arise, as they also control almost 61 per cent of commercial seed sales. The pesticide industry’s efforts to influence policymakers and regulators have obstructed reforms and paralysed global pesticide restrictions globally.”

B2B

To know more about GM Mustard 

 

Goods and Services Tax (GST) Finance and Banking

[op-ed snap] The GST train chugs along

source: 

Note4Students:

Mains Paper 3: Economy | Mobilization of resources

The country’s biggest tax reform is set to be implemented from 1st July and you need to about it from every aspect. The op-ed covers all the aspects related to GST. Read and bookmark it.

From UPSC perspective, following things are important:

Prelims level: What is GST? Items excluded, how states would be compensated for revenue loss, implementing authority and all such details.

Mains level: Is GST really perfect? Pros and cons of implementation and other related issues.Closely study the points in this news-card with respect to the fault lines of the current GST .They can help you to frame the answer if a question comes in mains where you have to critique the present GST structure.


Context:

  1. In about a month, India’s new indirect tax system will be rolled out
  2. It has been described as the biggest reform in indirect taxes

Joining the big league:

  1. India now joins some 160 other countries that already have a Goods and Services Tax (GST)
  2. The only large economy exception without a GST is the United States
  3. Most other countries have this consumption tax as a key component of their indirect taxes

Key features of GST:

  1. From production to consumption- It moves the tax system from production to consumption and covers the gross domestic product (GDP) more comprehensively. Because the tax base is now a much wider set of transactions, hopefully the per capita tax incidence will be lower
  2. Eliminates cascading-  It eliminates a major bane of cascading, i.e. having to pay tax on tax. and will thus increase efficiency of taxation.
  3. Interlocking incentives for compliance- The GST has interlocking incentives for compliance, because your tax incidence, and refund, depends on production of proof of tax paid by your supplier. The paperwork, or rather the computer records, is interlinked in a chain. No one person in the chain can evade tax because it hurts either his vendor or customer
  4. In that respect, the GST’s interlocked incentives look similar to Grameen Bank’s joint liability lending in microfinance. Micro loans are given without any collateral, but if one person defaults, the entire group is blacklisted. This ensures an almost 100% repayment rate

Benefits to the economy from GST:

  1. Higher GDP growth
  2. Lower inflation
  3. Buoyant tax collections
  4. Wider coverage and less tax evasion, and,
  5. Most importantly, a truly common economic market across the country

How did GST dream come true?

  1. The roll-out of this historic reform required amending the Constitution
  2. Legislative action in Parliament as well as State legislatures
  3. Setting up of the GST Council and deciding on the applicable tax rates on more than 1,200 items
  4. This achievement is itself a heroic example of consensus-building across States and political parties

GST- Background:

  1. The origins of the GST go back almost two decades and are also found in the reports of the Kelkar Committee on Tax Reforms
  2. The basic premise of tax reforms then and now is to aim for lower rates, simpler code and eliminate exemptions

Fault lines of current GST structure:

  1. Chance of classification disputes- With five slabs of 0%, 5%, 12%, 18%, 28% plus cess, we have increased the chance of classification disputes, discretion and litigation
  2. Encourage tax evasion- The high rates encourage tax evasion, distort decisions, and promote wasteful resources into tax avoidance
  3. Increase cost and complexity- Multiple rates increase cost and complexity. As the GST Task Force of the Thirteenth Finance Commission also pointed out, the cost of auditing the classification of exempt, low rate and high rate slabs across every stage of production, distribution and consumption is very high
  4. Inflation may go up- Since almost 60% of India’s GDP is from services, and the rate is moving from 15 to higher, it is quite likely that inflation will inch up. This is especially evident in the financial, telecom, hospitality and trade services
  5. Large part of the economy still uncovered- A large part of the economy is still not covered by the GST. Potable alcohol, crude oil, natural gas, aviation fuel, diesel, petrol, electricity and real estate are currently out, and States will levy their own taxes on these. Taxes paid on these will not be able to be offset against the GST. To that extent it is an inflationary distortion.
Climate Change Policy Interventions – Paris Conference, GCF, etc. Climate Change

[op-ed snap] An unequal burden

source:

Note4students

Mains Paper 3: Conservation, environmental pollution and degradation, environmental impact assessment

From UPSC perspective, following things are important:

Prelims level: Particulars of Paris agreement and the COP-22, the GCF and basics of green house gases.

Mains level: Very important


News

Context

  1. Background: Under the Paris Climate Agreement(PA, 2015) various countries developed and submitted pledges or national commitments, referred to in climate parlance as Nationally Determined Contributions (NDCs), which are effectively the actions each country is required to take
  2. The Conference of the Parties-22 (COP-22) in Marrakesh in November 2016 continued discussions on the implementation of the PA

Conditions on NDCs

  1. For about three-fourths of the 165 listed NDCs, implementation of pledges is conditional upon assistance on the finance and technology fronts
  2. These countries depend on help from industrialized economies to build capacity for implementation

Cause of concern

  1. Even if all the NDCs were implemented, estimates show that the planet would warm up by about 3°C from pre-industrial temperatures, well above the goal of staying below a 1.5°C or a 2°C rise
  2. This implies that all the NDCs ought to be implemented, and the support required should be provided(to countries which need help)
  3. But recent policy actions by U.S. President Donald Trump indicate that the U.S. may not be able meet its own NDC targets
  4. And further danger is also posed by the fact that under Mr. Trump Washington is not likely to fulfil its obligation to provide support for the implementation of NDCs by other countries
  5. Therefore, not just the U.S., but other countries too may fail without the means to implement their proposals

What we need?

  1. Improving energy efficiencies across various sectors and expanding the use of renewables are among the necessary activities that will enable us to move along low-carbon development pathways
  2. But we have to go well beyond that and shift to a radically different pattern of living that no longer involves GHG emissions.
  3. Capital investments are also needed, and without them poorer countries have few options

What is the Green Climate Fund?

  1. The Green Climate Fund (GCF) is an international mechanism set up at the Conference of the Parties-16 (COP-16) in Cancun in 2010
  2. As per the international agreement, advanced economies should provide an annual assistance of $100 billion, through public and private sources, by 2020 — the deadline is now extended to 2025
  3. The fund currently has pledges worth $10 billion from various developed countries and there is a commitment to fund projects that enable the lowering of emissions and help in dealing with the effects from climate change

India’s Position

  1. India, early in its NDC statement, had estimated a requirement of $2.5 trillion to carry out its climate actions until 2030
  2. A project to rejuvenate tanks and enhance renewables in Odisha was recently approved by the GCF for $34 million.
  3. It is expected to improve climate resilience in 15 of the most vulnerable districts of the State

Contributions to the GCF

  1. So far, more than 40 countries have made contributions to the GCF, the major contributors being the U.S., Japan and the U.K., but still the U.S. pledge is only $9.41 in per capita terms(many times lower than that of several European countries)

Stocks and flows

  1. With regard to emissions, it is useful to think of them in terms of stocks and flows. Stocks are what are there in the atmosphere and flows are what are released annually
  2. China now leads in the annual emissions. The U.S. is a close second, and India a distant third. Still, India’s emissions are a tenth of those of the U.S. in per capita terms
  3. The stocks in the atmosphere, released since the fuelling of the industrial revolution, led to immense prosperity for many countries
  4. When the world calls for funding for the GCF, it only asks these nations to deal with problems they have caused

The way forward

  1. The fact that all countries have responsibilities has been recognised in the Paris Agreement but the rich countries, especially the U.S. and European nations, need to do their best
  2. India or any other developing country simply recommitting to implement its NDCs will not accomplish much, since without help we cannot go far and need the assistance that is owed to us
Foreign Policy Watch: India-Myanmar India & Neighbours

[op-ed snap] The united states of Myanmar?

source: 

Note4Students:

Mains Paper 2: IR | India and its neighborhood- relations.

 Myanmar is India’s gateway to southeast Asia and also a major area of concern due to Rohingya conflict. The op-ed dives into history regarding efforts to establish democracy in Myanmar, present situation and possible solution.
From UPSC perspective, following things are important:
Prelims level: Democratic structure in Myanmar, minority issues (rohingya) and various forms of federalism.
Mains level: How uncertainty in Myanmar affects India, can India provide any help for resolution of issue and other related topics.

  News:

  1. Myanmar is to hold the second round of the 21st Panglong Union Peace Conference in its administrative capital, Nay Pyi Taw, from May 24 to 28
  2. A major issue at the meet will be the question of federalism
  3. The Panglong conference is likely to discuss the question of self-determination and the drafting of the Constitution by states and regions

Permission to draft constitution:

  1. During the government-led Union Peace Dialogue Joint Committee (UPDJC) meeting in Nay Pyi Taw on May 12, the committee agreed in principle to grant the seven states and seven regions permission to draft their own constitution on the condition that they would not break away from the country
  2. The UPDJC, headed by State Counsellor Aung San Suu Kyi, includes representatives from the ethnic armed groups, political parties and the government

History of federalism in Myanmar:

  1. The question of federalism or autonomy in Myanmar goes back to the pre-Independence era
  2. It is an important historical issue which unified and divided the country
  3. The idea of forming a union government that would give equal status to all citizens brought together different ethnic groups at the Panglong conference of 1947
  4. It has also divided the country psychologically and emotionally when the Anti-Fascist People’s Freedom League, the first elected government after Independence, failed to fulfil the political aspirations of the ethnic non-Burmans
  5. When the non-Burman ethnic groups pushed for autonomy or federalism, alongside having a weak civilian government at the centre, the military leadership staged a coup d’état in 1962
  6. Though incorporated in the 1947 Constitution, successive military governments construed the use of the term ‘federalism’ as being anti-national, anti-unity and pro-disintegration

Present situation:

  1. Until as recently as 2011, when the State Peace and Development Council military government allowed the Union Solidarity and Development Party led by President Thein Sein — himself a former military general — to form a quasi-civilian government, one could land in jail for advocating federalism
  2. With gradual democratisation, the Thein Sein government accepted the concept of federalism, one of the core principles of the ongoing peace process with the country’s ethnic armed groups
  3. As a pro-democratic party, the National League for Democracy has been supportive of a federal government

Various ideas for federalism:

  1. Nobody really knows what type of federalism Myanmar will eventually have
  2. Opinions on different federal systems such as symmetric federalism, asymmetric federalism, dual federalism, cooperative federalism and creative federalism have been discussed by policy makers and scholars

Problems associated with all these ideas:

  1. Symmetric federalism could be a major problem since the Bama or Burman majority dominates the seven regions plus the union territory of Nay Pyi Taw
  2. Even if the majority Burmans propose such arrangement, the minorities may oppose it on the ground of being politically disadvantageous
  3. Asymmetric federalism may be opposed by some minorities who feel that they would be outnumbered
  4. Dual federalism may be acceptable to the federal government, but the states may find it too invasive or intrusive
  5. Cooperative federalism, though an ideal solution for some, is an unlikely arrangement as it could lead to a power stalemate between the state and federal governments, making it difficult or even impossible to reach a compromise over important pieces of legislation
  6. Creative federalism could be a problem to implement if the two governments are unable to reach a consensus

Possible solution:

  1. Due to the scattered population of several ethnic groups, the other concept widely discussed is a non-territorial federalism
  2. It is well suited to the demands of some ethnic groups
  3. On the other hand, it could also be a source of conflict between different ethnic groups and even constrain relations between the state and regional governments which have a mixed population
  4. There is also a danger that the government or the military leadership would push for a ‘Myanmar Way to Federalism’ similar to the idea of ‘Burmese Way to Socialism’ or something along the lines of a “flourishing and disciplined democracy”, as enshrined in the 2008 Constitution.
Foreign Policy Watch: India-SCO Global Groupings

[op-ed snap] Raja Mandala: Modi diplomacy, part two

Source: 

Note4Students:

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora.

3 years of foreign policy jamboree by Modi government has been summed up in this op-ed. All the important nations in India’s foreign policy like USA, Russia, China, Pakistan have been discussed. Gains, future prospects and all related issues are covered. Read and bookmark this op-ed.

From UPSC perspective, following things are important:

Prelims level: NSG entry, location of all mentioned countries on map and related geographical features.

Mains level: Has foreign policy of Modi government delivered desired results. What went wrong and way forward.


Context:

  1. Few would disagree with the proposition that Prime Minister Narendra Modi has had a great run with foreign policy over the last three years
  2. His personal energy and pragmatism, coupled with an emphasis on problem-solving, had allowed Modi to rejuvenate India’s post-Cold War foreign policy
  3. India’s problems with Pakistan and China and the difficulties, for example, with the membership of the Nuclear Suppliers Group over the last year are symptomatic of the larger challenge that confronts Modi

 

Not in India’s hand:

  1. India cannot regulate the frequent flips in the relationships amongst other independent actors
  2. Nor can it predict, let alone control, sweeping political and technological revolutions that produce systemic change
  3. Even a carefully constructed foreign policy strategy could go awry if the external circumstances change radically

Foreign policy path of India since 1991:

  1. The policy path was, in fact, largely laid down way back at the turn of the 1990s when the Cold War ended and Delhi had to embark on economic reforms
  2. The unstated diplomatic guidelines included a greater emphasis on economic goals and improved relations with all major powers.
  3. There was a special focus on normalising ties with China and ending the estrangement with America
  4. Delhi also sought to limit the conflict with Pakistan, promote regional cooperation in the Subcontinent, reconnect with Asia and the Indian Ocean, and bring Delhi’s multilateral diplomacy in tune with India’s changing national needs in the reform era

Gain or loss from this path?

  1. All governments since 1991 have followed these policies with varying degrees of success
  2. A number of external factors facilitated India’s advances in this period
  3. One was the relative harmony among the major powers, thanks to the uncontested American unipolar moment
  4. The second was the widespread acceptance of economic globalisation or the Washington consensus
  5. The third was the digital revolution that allowed India to create a niche for itself in the IT sector

What did Mr. Modi do?

  1. Modi accepted the imperatives of the external world and pushed vigorously for improving ties with the US
  2. Reached out to China and Pakistan
  3. Welcomed foreign investment
  4. strengthened India’s regionalism and raised its international profile

Wary future:

  1. With America- PM Modi had considerable successes with America, but must now cope with a great power that is distracted by internecine battles in Washington
  2. With Russia- The PM’s effort to strengthen ties with Russia have entered a complex phase, as President Vladimir Putin tightens the China embrace and seeks a deal with US President Donald Trump
  3. With China- President Xi Jinping has decided that China’s moment in the sun has arrived, thanks to the huge and growing power differential between Beijing and its neighbours
  4. As Modi found out, being nice to Beijing does not mean China will reciprocate on NSG membership
  5. Xi’s enhanced bet on Pakistan has also made Islamabad less vulnerable to Western pressures, such as they are, on terrorism
  6. With Pakistan- Pakistan will neither be seduced by an Indian outreach, nor give into Delhi’s threats
  7. Finding ways to deal with a rising China and manage Pakistan’s intransigence will remain big problems for India

New external constraints:

  1. The shifting dynamic amidst great powers
  2. Continuing trouble on the borders
  3. Matched by the political backlash in the West against free trade and immigration
  4. The new external constraints come amidst the deepening of India’s interdependence with the world
  5. Nearly 40 per cent of India’s GDP is linked to the world and for half a century, its skilled personnel enjoyed open doors in many markets. Some of those are beginning to close
  6. On top of it all, the dramatic acceleration of technological change has put pressure on the one sector that has come to generate nearly a tenth of India’s GDP and symbolised India’s rise

Way forward:

  1. As its economy grows at seven percent and more, India’s net weight in the international system can only improve
  2. But to sustain India’s rise, Delhi must necessarily focus on three important elements
  3. It must shed the current complacency about growth and bring its economic and technology policies in line with the rapidly evolving external environment
  4. Second, India needs urgent and significant defence sector reform to lend purpose and effect to its growing military mass
  5. Third, sharper commercial, security and technology policies will help India better navigate the unfolding power shifts amongst America, China and Russia and construct durable strategic partnerships with such middle powers as Japan, France and Germany

 

Agricultural Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc. Agriculture

[op-ed snap] From plate to plough: An unfulfilled farm manifesto

source:

 

Note4Students:

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

The Modi Government is completing 3 years and is in full throttle mode, whether it be announcing new measures/schemes or reviewing the previous ones. This newscard dives down into performance of Modi Government with respect to Agriculture sector. Read and bookmark it.

From UPSC perspective, following things are important:

Prelims level: All the schemes related to agriculture (highlighted in newscard), other reforms.

Mains level: Various schemes, their outcomes and what needs to be done.You can use a lots of  fodder from this op-ed while writing answer to any Agriculture related question in both GS Mains and essay paper.


Context:

  1. On the completion of three years of Modi Government, while a number of steps have been taken to realise election promises, several others have fallen by the wayside
  2. NDA’s flagship programmes, especially the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), Fasal Bima Yojana (PMFBY) and e-NAM were all steps in the right direction but so far, their impact has not been felt

What is being done now:

  1. Government has promised that it will take significant steps to double the Farmer’s income by 2022.
  2. The idea of a price stabilisation fund, (which started with a corpus of Rs 500 crore to tackle high onion prices, has enlarged to more than Rs 3,500 crore), has built a buffer stock of pulses of almost 2 million tonnes but given the short shelf life of pulses, the challenge is to continuously rotate this stock to stabilise prices
  3. Another major initiative of the government was to issue soil health cards to all farmers once in two years. A target of 14 crore cards was fixed against which six crore cards have been distributed so far, but this can be attributed to lukewarm response of states
  4. There are indications that a major change in the procedure for the disbursement of the fertiliser subsidy is likely to be rolled out from July 2017. Fertiliser companies will be paid subsidy only when the dealer has actually sold the fertiliser

What are the associated problems?

  1. There is no officially spelling out whether the farmer’s income being discussed is real income or nominal income.
  2. The reforms in the food management sector have been almost forgotten and there has been hardly any initiative to try DBT for food subsidy on a large-scale despite the recommendation of the high-level committee under Shanta Kumar
  3. Most states are reluctant to distribute pulses under the PDS, thus procuring agencies will have to sell them in the open market or give to large organisations like the army
  4. UP, Punjab, Haryana, Rajasthan and Bihar have shown poor performance in testing soil samples hence, expected benefits of the application of appropriate doses of fertiliser have not been experienced
  5. Apprehension that fertiliser subsidy scheme will take into account the health of soil and the actual need of nutrients while reimbursing subsidy to the companies

Suggested solutions:

  1. Directly transfer the fertiliser subsidy to farmers’ accounts and free up fertiliser prices, as recommended by the Shanta Kumar panel
  2. This would automatically encourage farmers to use the information available in the soil health cards

B2B

Shanta Kumar Panel

The Central government in August 2-14 set-up a high level committee to study the core issues of FCI and make suitable recommendations to restructure FCI to improve its operational efficiency and financial management.

Key Recommendations of  Shanta Kumar Committee

  1. FCI should transfer all procurement operations atleast to states who have considerable experience and infrastructure. These are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab. FCI should instead procure only the surplus which is contributed to the Central pool by these states to support farmers in distress due to small landholdings and thus have to settle with a sale price far below the MSP in states like UP, Bihar, West Bengal, Assam.   In addition, it should channelize this surplus for various subsidy acts like NFSA.
  2. There should be uniformity and rationality in procurement operations by implementing 3 points:
  3. The Centre will not accept any additional/surplus food-grains from states who give subsidy/bonus to farmers above the MSP. Such states will have to bear all costs (storage and distribution) themselves.
  4. Uniform statutory levies among all states around 3 or 4% of MSP.
  5. Stringent quality checks at the when accepting food grains for Central pool.
  6. Encourage and speeden the Negotiable Warehouse Receipt System (NWRS) under which farmers can park their produce in registered warehouses and even get upto 80% advance from banks @ MSP. This will considerably reduce the storage costs and responsibility of the government.
Citizenship and related issues Constitution

[op-ed snap] Rights, not religion

source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, following things are important:

Prelims level:Particulars of Citizenship Act, Important points on History of Chakmas and Hajong community. UPSC has asked questions on various tribes of North east many times in last few prelims.


News

  1. What?: The Centre and the Arunachal Pradesh government are in talks to accord Indian citizenship to the Chakma and Hajong refugee community.

Historical Background: 

  1. The current question of the Chakma and Hajong refugees in Arunachal Pradesh is rooted in the conflicts which emerged between the reactionary ruling blocs of India and Pakistan and, subsequently, Bangladesh, which engendered the expulsion of the Chakma and Hajong peoples from their traditional homelands
  2. The Buddhist Chakmas and Hindu Hajongs, the innocent victims of partition, originally belonged to the Chittagong Hill Tracts and Maimensingh districts respectively, a part of erstwhile East Pakistan (now Bangladesh). Pakistan’s policy of persistent religious persecution of these Buddhist tribes and the displacement caused by the Kaptai Hydel Power Project forced them to migrate and take refuge in India in 1964
  3. The Supreme Court had given a three-month deadline in 2015 to the Centre to process the demand.
  4. Only about 5,000 persons of the original 14,888 persons of 2,748 refugee families settled in Arunachal between 1964 to ’69 are reportedly alive, which means most persons in the two communities were born in India and hence, qualify for Indian citizenship by birth

Concerns?

  1. Since the 1980s, the All Arunachal Pradesh Students’ Union (AAPSU) has spearheaded a mass movement against granting citizenship to Chakmas and Hajongs
  2. The AAPSU fears that the refugees could soon outnumber the indigenous population and influence electoral outcomes
  3. Immigration is a polarising issue in the Northeast. Hence, it is necessary that the Centre and the Arunachal government remove the fears of the indigenous population on the citizenship issue

Back2basics

To know more about these tribes: click2read

Goods and Services Tax (GST) Finance and Banking

[op-ed snap] GST clarity, at last

Note4Students:

Mains Paper 3: Economy | Mobilization of resources

Important op-ed. GST set to be rolled out in July makes it way more important than any other topic. Apart from question in Prelims, you can definitely expect a related question in Mains. Bookmark this newscard for future reading.

From UPSC perspective, following things are important:

Prelims level: GST rate slabs, implementing department and other related details.

From Mains level: A  complete understanding of GST is necessary and this op-ed along with tax rates also discusses near term challenges. Read and note them.


Context:

  1. The Goods and Services Tax Council has released details of the rates at which over 1,200 goods will be taxed when the GST regime takes effect

New tax structure:

  1. Under the new structure, judging from the initial list of 1,211 items, the predominant share (43%) of goods will be taxed at 18%, while 17% and 14% of the notified items will fall under the 12% and 5% tax rate slabs, respectively
  2. Tax exempt items: Around 7% of the items, which include essential goods such as milk, fruits, cereals and poultry, have been exempted from all taxes
  3. Highest tax slab: A significant share (19%) of goods, however, has been tucked under the 28% slab: many of these cater to the daily needs of the growing middle class
  4. Cess applied: Apart from these four regular tax slabs, additional cess taxes of varying rates have also been imposed on sin and luxury goods such as pan masala, cigarettes and sports utility vehicles to compensate the States for loss of revenue during the initial years

Effects of this change:

  1. Progressive tax code: The four-slab structure of the GST regime gives it the look of a progressive tax code, in contrast to similar consumption-based taxes prevalent in other countries, which are essentially simple, flat taxes
  2. Revenue-neutral: Government has said the new tax regime will be revenue-neutral. If so, the GST’s influence on private spending will possibly remain muted

Challenges in near future:

  1. Check backdoor rate manipulation: Prevent backdoor rigging of rates through additional levies that are completely discretionary
  2. Keeping states under control: States that have added significantly to their debt burden in recent years must be kept in check. Additional discretionary taxes would add to the overall tax burden and particularly compromise on tax predictability
  3. Try keeping tax rates immune from fiscal demands: The Centre and States must keep their pressing fiscal demands from influencing tax rates upwards in the future

B2B: 

Image result for GST in India explained

Source: http://indianexpress.com/article/business/economy/low-gst-rate-of-18-to-reduce-taxes-on-goods-but-services-may-turn-costly-2952660/

 

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