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  • [pib] MSME Sustainable (ZED) Certification Scheme

    The  Union Ministry for Micro, Small and Medium Enterprises has launched the MSME Sustainable (ZED) Certification Scheme.

    MSME Sustainable (ZED) Certification Scheme

    • This Scheme is an extensive drive to enable and facilitate MSMEs adopt Zero Defect Zero Effect (ZED) practices.
    • It aims motivate and incentivize them for ZED Certification while also encouraging them to become MSME Champions.
    • Through the ZED Certification, MSMEs can reduce wastages substantially, increase productivity, enhance environmental consciousness, save energy, optimally use natural resources, expand their markets, etc.

    Components of the scheme

    • Under the Scheme, MSMEs will get subsidy as per the following structure, on the cost of ZED certification:
    1. Micro Enterprises: 80%
    2. Small Enterprises: 60%
    3. Medium Enterprises: 50%
    • There will be an additional subsidy of 10% for the MSMEs owned by Women/SC/ST Entrepreneurs OR MSMEs in NER/Himalayan/LWE/Island territories/aspirational districts.
    • In addition to above, there will be an additional subsidy of 5% for MSMEs which are also a part of the SFURTI OR Micro & Small Enterprises – Cluster Development Programme (MSE-CDP) of the Ministry.
    • Further, a limited purpose joining reward of Rs. 10,000/- will be offered to each MSME once they take the ZED Pledge.

    Back2Basics: Zero Defect Zero Effect Scheme

    • Launched in 2016 by the Ministry of MSME, the ZED scheme is an integrated and comprehensive certification system.
    • The scheme accounts for productivity, quality, pollution mitigation, energy efficiency, financial status, human resource and technological depth including design and IPR in both products and processes.
    • Its mission is to develop and implement the ‘ZED’ culture in India based on the principles of Zero Defect & Zero Effect.
    • ZED principles include:
    1. Zero Defect: Zero non-conformance or non-compliance
    2. Zero Effect: Zero wastage, liquid discharge, solid waste; zero pollution

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  • Tribes in news: Hattis of Himachal Pradesh

    The Centre is set to consider the Himachal Pradesh government’s request for inclusion of the Hatti community in the list of Scheduled Tribes in the state.

    Who are the Hattis?

    • The Hattis are a close-knit community who got their name from their tradition of selling homegrown vegetables, crops, meat and wool etc. at small markets called ‘haat’ in towns.
    • The Hatti community, whose men generally don a distinctive white headgear during ceremonies, is cut off from Sirmaur by two rivers called Giri and Tons.
    • Tons divides it from the Jaunsar Bawar area of Uttarakhand.
    • The Hattis who live in the trans-Giri area and Jaunsar Bawar in Uttarakhand were once part of the royal estate of Sirmaur until Jaunsar Bawar’s separation in 1815.
    • Due to topographical disadvantages, the Hattis living in the Kamrau, Sangrah, and Shilliai areas lag behind in education and employment.

    Societal norms of Hattis

    • The Hattis are governed by a traditional council called Khumbli, which like the khaps of Haryana, decide community matters.
    • The Khumbli’s power has remained unchallenged despite the establishment of the panchayati raj system.
    • The two clans have similar traditions, and inter-marriages are commonplace.
    • There is a fairly rigid caste system among the Hattis — the Bhat and Khash are the upper castes, while the Badhois are below them.
    • Inter-caste marriages have traditionally remained a strict no-no.

    Who are Paharis?

    • The proposal called for the inclusion of the “Paddari tribe”, “Koli” and “Gadda Brahman” communities to be included on the ST list of J&K.
    • The suggestion for the inclusion had come from the commission set up for socially and educationally backward classes in the UT.
    • The J&K delimitation commission has reserved six of the nine Assembly segments in the Pir Panjal Valley for STs.

    Back2Basics: Scheduled Tribes

    The above Article also provides for listing of scheduled tribes State/Union Territory wise and not on an all India basis.

    • The term ‘Scheduled Tribes’ first appeared in the Constitution of India.
    • Article 366 (25) defined scheduled tribes as “such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under Article 342 to be Scheduled Tribes for the purposes of this constitution”.
    • Article 342 prescribes procedure to be followed in the matter of specification of scheduled tribes.

    How are STs notified?

    • As per the current procedure, each proposal for the scheduling of a new community as ST has to originate from the relevant State Government.
    • It is then sent to the Ministry of Tribal Affairs, which sends it to the Office of the Registrar General of India (RGI).
    • Once approved by the Office of the RGI, it is sent to the National Commission for Scheduled Tribes (NCST), and only after its approval is it sent to the Cabinet.

    Status of STs in India

    • The Census 2011 has revealed that there are said to be 705 ethnic groups notified as Scheduled Tribes (STs).
    • Over 10 crore Indians are notified as STs, of which 1.04 crore live in urban areas.
    • The STs constitute 8.6% of the population and 11.3% of the rural population.

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  • The post-pandemic world needs better public schools

    Context

    The pandemic has thrown a harsh light on the vulnerabilities and challenges faced by the world in education. There is an immense learning gap due to existing inequalities.

    Need for investment in learning systems

    • In India, we have to accept that unless we mobilise learning resources and institutions at the government level, the divides will continue to expand and learners will continue to fall between the cracks.
    • Systems have to be put into place to find a variety of methods to equip all learners — privileged, poor, middle-class and alternatively-abled.
    •  The challenge is about returning to school.
    • In wealthier nations, schools have always been the first to open and last to close and citizens have benefited from the public school system.
    • In India, across states, there is a sense of despair due to unemployment and lack of financial resources, which has snowballed due to the pandemic, resulting in greater inequality.
    • Sending children to school, as opposed to keeping them at home, is a huge financial investment, particularly in the private school system.
    • Parents have refrained from sending their children back to school due to a lack of funds.

    Viewing education through government school lens

    • The big shift that we as a nation have to make is viewing education through a government school lens.
    • This will only take place if states provide the opportunity for free, compulsory, neighbourhood education.
    • Radical reforms have to be implemented to restructure government schools and ensure quality.
    • The government, both at the Centre and in the states, should build good-quality primary, middle and high schools and provide facilities that the best private schools have to offer.
    • Online learning is not the way forward: We are subsumed by the myth that technology has expanded potential.
    • The concern is that online learning will create greater inequality, not only in the global South but even in the most well-resourced corners of the planet.
    • Online learning is not the way forward.
    • The UNESCO’s International Commission on the Futures of Education states in its report, “the core commitments that should always be remembered are public education and common good”.
    • It says, “This is not the time to step back and weaken these principles but rather to affirm and reinforce them.”
    • We must take the opportunity to protect and advance public education.
    • We cannot allow the government health system and government education to be opposed to one another. Their synergies must overlap

    Conclusion

    Public education is crucial to societies, communities and individual lives. It is the only thing that will enable us to live with dignity and purpose.

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  • State of (un)employment in India

    Data from the Centre for Monitoring Indian Economy (CMIE) shows that India’s labour force participation rate (LFPR) has fallen to just 40% from an already low 47% in 2016.

    What is LFPR?

    • Before understanding LFPR, we need to define the labour force itself.
    • According to the CMIE, the labour force consists of persons who are of age 15 years or older, and belong to either of the following two categories:
    1. are employed
    2. are unemployed and are willing to work and are actively looking for a job
    • There is a crucial commonality between the two categories — they both have people “demanding” jobs.
    • This demand is what LFPR refers to. While those in category 1 succeed in getting a job, those in category 2 fail to do so.
    • Thus, the LFPR essentially is the percentage of the working-age (15 years or older) population that is asking for a job; it represents the “demand” for jobs in an economy.
    • It includes those who are employed and those who are unemployed.
    • The Unemployment Rate (UER), which is routinely quoted in the news, is nothing but the number of unemployed (category 2) as a proportion of the labour force.

    What is the significance of LFPR in India?

    • Typically, it is expected that the LFPR will remain largely stable.
    • As such, any analysis of unemployment in an economy can be done just by looking at the UER.
    • But, in India, the LFPR is not only lower than in the rest of the world but also falling. This, in turn, affects the UER because LFPR is the base (the denominator) on which UER is calculated.
    • The world over, LFPR is around 60%. In India, it has been sliding over the last 10 years and has shrunk from 47% in 2016 to just 40% as of December 2021.
    • This shrinkage implies that merely looking at UER will under-report the stress of unemployment in India.
    • Recent trend suggests that not only that more than half of India’s population in the working-age group is deciding to sit out of the job market, but also that this proportion of people is increasing.

    How is it under-reported?

    • Imagine that there are just 100 people in the working-age group but only 60 ask for jobs — that is, the LFPR is 60% — and of these 60 people, 6 did not get a job. This would imply a UER of 10%.
    • Now imagine a scenario when the LFPR has fallen to 40% and, as such, only 40 people are demanding work. And of these 40, only 2 people fail to get a job.
    • The UER would have fallen to 5% and it might appear that the economy is doing better on the jobs front but the truth is starkly different.
    • The truth is that beyond the 2 who are unemployed, a total of 20 people have stopped demanding work.
    • Typically, this happens when people in the working-age get disheartened from not finding work.

    So, what is the correct way to assess India’s unemployment stress?

    • When LFPR is falling as steadily and as sharply as it has done in India’s case, it is better to track another variable: the Employment Rate (ER).
    • The ER refers to the total number of employed people as a percentage of the working-age population.
    • By using the working-age population as the base and looking at the number of people with jobs, the ER captures the fall in LFPR to better represent the stress in the labour market.

    ER trends in India

    • If one looks at the ER data (Chart 1), it becomes clear that while India’s working-age population has been increasing each year, the percentage of people with jobs has been coming down sharply.
    • Looking at the absolute numbers makes the stress even more clear.
    • In December 2021, India had 107.9 crore people in the working age group and of these, only 40.4 crore had a job (an ER of 37.4%).
    • Compare this with December 2016 when India had 95.9 crore in the working-age group and 41.2 crore with jobs (ER 43%).
    • In five years, while the total working-age population has gone up by 12 crore, the number of people with jobs has gone down by 80 lakh.

    Why is India’s LFPR so low?

    • The main reason for India’s LFPR being low is the abysmally low level of female LFPR.
    • According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%.
    • In other words, less than one in 10 working-age women in India are even demanding work.
    • Even if one sources data from the World Bank, India’s female labour force participation rate is around 25% when the global average is 47%.

    Why do so few women demand work?

    • One reason is essentially about the working conditions — such as law and order, efficient public transportation, violence against women, societal norms etc — being far from conducive for women to seek work.
    • The other has to do with correctly measuring women’s contribution to the economy.
    • There are methodological issues in formally capturing women’s contribution to the economy since a lot of women in India are exclusively involved within their own homes.
    • Lastly, it is also a question of adequate job opportunities for women.

    How do people who leave the labour force survive?

    • Households with more than one working member often witness this phenomenon.
    • The fall in the LFPR since 2016 has been accompanied by a fall in the proportion of households where more than one person is employed.
    • The fall in LFPR has largely been the result of the additional person employed in a typical household losing a job.

     

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  • SC Ruling on Sedition Law

    The Supreme Court has fixed May 5 for final hearing of the petitions challenging the constitutionality of the sedition law and made it clear that it will not brook any delay in the form of requests for adjournment.

    What is the Sedition Law?

    • Section 124A of the Indian Penal Code lays down the punishment for sedition. The IPC was enacted in 1860, under the British Raj.
    • The then British government in India feared that religious preachers on the Indian subcontinent would wage a war against the government.
    • Particularly after the successful suppression of the Wahabi/Waliullah Movement by the British, the need was felt for such law.
    • Throughout the Raj, this section was used to suppress activists in favor of national independence, including Tilak and Mahatma Gandhi, both of whom were found guilty and imprisoned.

    What is Sedition?

    • The Section 124A defines sedition as:

    An offence committed when “any person by words, either spoken or written, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards the government established by law in India”.

    • Disaffection includes disloyalty and all feelings of enmity.
    • However, comments without exciting or attempting to excite hatred, contempt or disaffection, will not constitute an offense.
    • Sedition is a non-bailable offense.
    • Punishment under Section 124A ranges from imprisonment up to three years to a life term with/without a fine.

    Sedition as a cognizable offense

    • Sedition was made a cognizable offense for the first time in history in India during the tenure of Prime Minister Indira Gandhi in 1973, that is, arrest without a warrant was now permissible.
    • In 1962 the Supreme Court of India interpreted the section to apply only if there is, say, “incitement to violence” or “overthrowing a democratically elected government through violent means”.

    Is it constitutionally valid?

    • Violative of FRs: Two high courts had found it unconstitutional after Independence, as it violated the freedom of speech and expression.
    • Reasonable restrictions: The Constitution was amended to include ‘public order’ as one of the ‘reasonable restrictions’ on which free speech could be abridged by law.
    • Kedar Nath Case: Thereafter, the Supreme Court, in Kedar Nath Singh v. State of Bihar (1962) upheld its validity.
    • Limited use: At the same time, it limited its application to acts that involve “intention or tendency to create disorder” or incitement to violence.
    • Strong criticism doesn’t amount to sedition: Thus, even strongly worded remarks, as long as they do not excite disloyalty and enmity, or incite violence, are not an offence under this section.

    Why the controversy now?

    • Frequent use: In recent times, the resort to this section is seen as disturbingly frequent.
    • Curbing dissent: Activists, cartoonists and intellectuals have been arrested under this section, drawing criticism from liberals that it is being used to suppress dissent and silence critics.
    • Misuse for propaganda: Authorities and the police who invoke this section defend the measure as a necessary step to prevent public disorder and anti-national activities.
    • Irrelevance: Many of them have also been detained under the National Security Act and UAPA.

    What is being debated about it?

    • Demand for its scrapping: Liberals and rights activists have been demanding the scrapping of Section 124A.
    • Provision is outdated: It is argued that the provision is “overbroad”, i.e., it defines the offence in wide terms threatening the liberty of citizens.
    • Various calls for its reconsideration: The Law Commission has also called for a reconsideration of the section.
    • Tyranny of the law: It has pointed that Britain abolished it more than a decade ago and raised the question of whether a provision introduced by the British to put down the freedom struggle should continue to be law in India.
    • Doctrine of severability: Some argue that a presumption of constitutionality does not apply to pre-constitutional laws as those laws have been made by foreign legislature or bodies.

    Way forward

    • India is the largest democracy in the world and the right to free speech and expression is an essential ingredient of democracy.
    • The sedition law should not be abolished as some measures are needed to check communal violence & insurgency activities like Naxals.
    • The definition of sedition should be narrowed down, to include only the issues pertaining to the territorial integrity of India as well as the sovereignty of the country.
    • Section 124A should not be misused as a tool to curb free speech.

     

    Try answering this PYQ:

    Q.With reference to Rowlatt Satyagraha, which of the following statements is/are correct?

    1. The Rowlatt Act was based on the recommendations of the ‘Sedition Committee’.
    2. In Rowlatt Satyagraha, Gandhiji tried to utilize the Home Rule League.
    3. Demonstrations against the arrival of Simon Commission coincided with Rowlatt Satyagraha.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 1 and 2 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”kvzwyjlonz” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

    Also read

    [Burning Issue] Should sedition law be scrapped?

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  • ‘Mission Antyodaya’ can help transform rural India

    Context

    This article argues that given the right momentum, the ‘Mission Antyodaya’ project bears great promise to eradicate poverty in its multiple dimensions among rural households.

    Background of Mission Antyodaya

    • The ‘Mission Antyodaya’ project was launched by the Government of India in 2017-18.
    • The Ministry of Panchayati Raj and the Ministry of Rural Development act as the nodal agents to take the mission forward.
    • Key goals: The main objective of ‘Mission Antyodaya’ is to ensure optimum use of resources through the convergence of various schemes that address multiple deprivations of poverty, making gram panchayat the hub of a development plan.
    • Annual survey: This planning process is supported by an annual survey that helps to assess the various development gaps at the gram panchayat level, by collecting data regarding the 29 subjects assigned to panchayats by the Eleventh Schedule of the Constitution.
    • Also, data regarding health and nutrition, social security, good governance, water management and so on are also collected.
    • The idea of the Ministry of Panchayati Raj to identify the gaps in basic needs at the local level, and integrating resources of various schemes, self-help groups, voluntary organisations and so on to finance them needs coordination and capacity-building of a high order.
    • If pursued in a genuine manner, this can foster economic development and inter-jurisdictional equity.

    Infrastructural gaps as pointed out by the Mission Antyodaya Survey

    • The ‘Mission Antyodaya’ survey in 2019-20 for the first time collected data that shed light on the infrastructural gaps from 2.67 lakh gram panchayats, comprising 6.48 lakh villages with 1.03 billion population.
    • The maximum score values assigned will add up to 100 and are presented in class intervals of 10.
    • While no State in India falls in the top score bracket of 90 to 100, 1,484 gram panchayats fall in the bottom bracket.
    • Even in the score range of 80 to 90, 10 States and all Union Territories do not appear.
    • The total number of gram panchayats for all the 18 States that have reported adds up only to 260, constituting only 0.10% of the total 2,67,466 gram panchayats in the country.
    •  If we consider a score range of 70-80 as a respectable attainment level, Kerala tops but accounts for only 34.69% of gram panchayats of the State, the corresponding all-India average is as low as 1.09%.
    • The composite index data, a sort of surrogate for human development, are also not encouraging.
    • Although only 15 gram panchayats in the country fall in the bottom range below 10 scores, more than a fifth of gram panchayats in India are below the 40 range.
    • The gap report and the composite index show in unmistakable terms that building ‘economic development and social justice’ remains a distant goal even after 30 years of the decentralisation reforms and nearly 75 years into Independence.

    Way forward

    • Converge resources: Given the ‘saturation approach’ (100% targets on select items) of the Ministry of Panchayati Raj, the possibilities of realising universal primary health care, literacy, drinking water supply and the like are also immense.
    • But there is no serious effort to converge resources (the Mahatma Gandhi National Rural Employment Guarantee Act, the National Rural Livelihood Mission, National Social Assistance Programme, Pradhan Mantri Awas Yojana, etc.) and save administrative expenses.
    • Deploy the data to India’s fiscal federalism: Another lapse is the failure to deploy the data to India’s fiscal federalism, particularly to improve the transfer system and horizontal equity in the delivery of public goods in India at the sub-State level.
    • The constitutional goal of planning and implementing economic development and social justice can be achieved only through strong policy interventions.

    Conclusion

    The policy history of India has been witness to the phenomenon of announcing big projects and failing to take them to their logical consequence. ‘Mission Antyodaya’ is a striking case in recent times.

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  • Goan politician accorded Lifetime Rank of Cabinet Minister

    Recently a politician in Goa was accorded the lifetime status of the rank of Cabinet Minister who was, a six-time Chief Minister of Goa and a legislator for a full 50 years. Hence a PIL has been filed in the High Court of Bombay at Goa.

    What is the “Lifetime Status of the rank of Cabinet minister”?

    • The former Chief Minister and former Speaker (of the Goa Legislative Assembly) had completed 50 years as a legislator.
    • The Cabinet decided that in future also, those who complete 50 years and hold posts like CM and Speaker will be given the Cabinet status even after their retirement.

    What is the PIL against this designation?

    • The PIL has urged the High Court to quash the notification of the government under which the person was conferred with the “lifetime status”.
    • It has contended that Goa has a 12-member Cabinet, and the conferment of Cabinet status results in the number of Cabinet ranks rising to 13, which exceeds the ceiling mandated by the Constitution.
    • This ceiling was mandated by the 91st Amendment which aimed to prevent jumbo Cabinets and the resultant drain on the public exchequer.

    How the 91st Amendment Act does relates here?

    • The Constitution (91st Amendment) Act, 2003 inserted clause 1A in Article 164.
    • It says the total number of Ministers, including the Chief Minister, in the Council of Ministers in a State shall not exceed 15% of the total number of members of the Legislative Assembly of that State.
    • It provided a condition that the number of Ministers, including the Chief Minister in a State shall not be less than twelve.
    • There are 40 seats in the unicameral Goa Assembly.

    Why is the designation problematic?

    • A cabinet minister for life would be entitled to 12 staff members – OSDs, support staff, peons, driver – which would cost the exchequer Rs 90 lakh a year.
    • The ‘Cabinet’ rank would also entitle him to government accommodation, vehicle and unlimited free travel for him and his spouse.
    • This is just none other case but political self-appeasement.

    Back2Basics: 91st Constitutional Amendment Act, 2003

    • It made the provisions to limit the size of Council of Ministers, to debar defectors from holding public offices, and to strengthen the anti-defection law.
    • The total number of ministers, including the Prime Minister, in the Central Council of Ministers shall not exceed 15% of the total strength of the Lok Sabha.
    • A member of either house of Parliament belonging to any political party who is disqualified on the ground of defection shall also be disqualified to be appointed as a minister.
    • The total number of ministers, including the Chief Minister, in the Council of Ministers in a state shall not exceed 15% of the total strength of the legislative Assembly of that state.
    • But, the number of ministers, including the Chief Minister, in a state shall not be less than 12.
    • A member of either House of a state legislature belonging to any political party who is disqualified on the ground of defection shall also be disqualified to be appointed as a minister.
    • The provision of the Tenth Schedule (anti-defection law) pertaining to exemption from disqualification in case of split by one-third members of legislature party has been deleted.
    • It means that the defectors have no more protection on grounds of splits.

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  • Countries will have to ‘justify’ Veto Votes at UN

    The 193 members of the United Nations General Assembly adopted by consensus a resolution requiring the five permanent members of the Security Council to justify their use of the veto.

    Why such move?

    • The push for reform was driven by Russia’s invasion of Ukraine.
    • The measure is intended to make veto-holders United States, China, Russia, France and Britain “pay a higher political price” when they use the veto to strike down a Security Council resolution.
    • For years Russia (and the US) has used its veto power to block UNSC resolutions — which, unlike General Assembly resolutions, are enforceable under international law.

    What is the Veto Power at the UN?

    • The UN Security Council veto power is the power of the five permanent members of the UN Security Council to veto any “substantive” resolution.
    • They also happen to be the nuclear-weapon states (NWS) under the terms of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT).
    • However, a permanent member’s abstention or absence does not prevent a draft resolution from being adopted.
    • This veto power does not apply to “procedural” votes, as determined by the permanent members themselves.
    • A permanent member can also block the selection of a Secretary-General, although a formal veto is unnecessary since the vote is taken behind closed doors.

    Issues with Veto Power

    • The veto power is controversial. Supporters regard it as a promoter of international stability, a check against military interventions, and a critical safeguard against US domination.
    • Critics say that the veto is the most undemocratic element of the UN, as well as the main cause of inaction on war crimes and crimes against humanity.
    • It effectively prevents UN action against the permanent members and their allies.

    Back2Basics: United Nations Security Council

    • The UNSC is one of the six principal organs of the United Nations and is charged with the maintenance of international peace and security.
    • Its powers include the establishment of peacekeeping operations, the establishment of international sanctions, and the authorization of military action through Security Council resolutions.
    • It is the only UN body with the authority to issue binding resolutions to member states.
    • The Security Council consists of fifteen members. Russia, the United Kingdom, France, China, and the United States—serve as the body’s five permanent members.
    • These permanent members can veto any substantive Security Council resolution, including those on the admission of new member states or candidates for Secretary-General.
    • The Security Council also has 10 non-permanent members, elected on a regional basis to serve two-year terms. The body’s presidency rotates monthly among its members.

    Also read

    Explained: India at United Nations Security Council

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  • Direct Tax collections surge in FY22

    India’s net direct tax collections amounted to ₹14,09,640.83 crore for FY22, which is the highest collection ever.

    What are Direct Taxes?

    • A type of tax where the impact and the incidence fall under the same category can be defined as a Direct Tax.
    • The tax is paid directly by the organization or an individual to the entity that has imposed the payment.
    • The tax must be paid directly to the government and cannot be paid to anyone else.

     Why in news?

    • The surge in direct tax collection signals that the Indian economy has bounced back after two years of the pandemic.

    Rise in direct tax collection

    • As against ₹14.09 lakh crore this year, our collection in 2020-21 was only ₹9.45 lakh crore.
    • In a single year, the economy has moved upward by nearly ₹4.5 lakh crore, registering a growth of 49%.
    • The collection is the best-ever as far as income tax and corporation tax are concerned.

    What about direct tax-to-GDP ratio?

    • The direct tax-to-GDP ratio is around 12%.
    • The Central Board of Direct Taxes (CBDT) was working to raise the ratio to 15-20% in 5-10 years.

    Why is it significant?

    • A tax-to-GDP ratio is a gauge of a nation’s tax revenue relative to the size of its economy as measured by gross domestic product (GDP).
    • The ratio provides a useful look at a country’s tax revenue because it reveals potential taxation relative to the economy.
    • It also enables a view of the overall direction of a nation’s tax policy, as well as international comparisons between the tax revenues of different countries.

    Back2Basics: Types of Direct Taxes

    The various types of direct tax that are imposed in India are mentioned below:

    (1) Income Tax

    • Depending on an individual’s age and earnings, income tax must be paid.
    • Various tax slabs are determined by the Government of India which determines the amount of Income Tax that must be paid.
    • The taxpayer must file Income Tax Returns (ITR) on a yearly basis.
    • Individuals may receive a refund or might have to pay a tax depending on their ITR. Penalties are levied in case individuals do not file ITR.

    (2) Wealth Tax

    • The tax must be paid on a yearly basis and depends on the ownership of properties and the market value of the property.
    • In case an individual owns a property, wealth tax must be paid and does not depend on whether the property generates an income or not.
    • Corporate taxpayers, Hindu Undivided Families (HUFs), and individuals must pay wealth tax depending on their residential status.
    • Payment of wealth tax is exempt for assets like gold deposit bonds, stock holdings, house property, commercial property that have been rented for more than 300 days, and if the house property is owned for business and professional use.

    (3) Estate Tax

    • It is also called Inheritance Tax and is paid based on the value of the estate or the money that an individual has left after his/her death.

    (4) Corporate Tax

    • Domestic companies, apart from shareholders, will have to pay corporate tax.
    • Foreign corporations who make an income in India will also have to pay corporate tax.
    • Income earned via selling assets, technical service fees, dividends, royalties, or interest that is based in India is taxable.
    • The below-mentioned taxes are also included under Corporate Tax:
    1. Securities Transaction Tax (STT): The tax must be paid for any income that is earned via security transactions that are taxable.
    2. Dividend Distribution Tax (DDT): In case any domestic companies declare, distribute, or are paid any amounts as dividends by shareholders, DDT is levied on them. However, DDT is not levied on foreign companies.
    3. Fringe Benefits Tax: For companies that provide fringe benefits for maids, drivers, etc., Fringe Benefits Tax is levied on them.
    4. Minimum Alternate Tax (MAT): For zero tax companies that have accounts prepared according to the Companies Act, MAT is levied on them.

    (5) Capital Gains Tax:

    • It is a form of direct tax that is paid due to the income that is earned from the sale of assets or investments. Investments in farms, bonds, shares, businesses, art, and home come under capital assets.
    • Based on its holding period, tax can be classified into long-term and short-term.
    • Any assets, apart from securities, that are sold within 36 months from the time they were acquired come under short-term gains.
    • Long-term assets are levied if any income is generated from the sale of properties that have been held for a duration of more than 36 months.

    Advantages of Direct Taxes

    The main advantages of Direct Taxes in India are mentioned below:

    • Economic and Social balance: The Government of India has launched well-balanced tax slabs depending on an individual’s earnings and age. The tax slabs are also determined based on the economic situation of the country. Exemptions are also put in place so that all income inequalities are balanced out.
    • Productivity: As there is a growth in the number of people who work and community, the returns from direct taxes also increases. Therefore, direct taxes are considered to be very productive.
    • Inflation is curbed: Tax is increased by the government during inflation. The increase in taxes reduces the necessity for goods and services, which leads to inflation to compress.
    • Certainty: Due to the presence of direct taxes, there is a sense of certainty from the government and the taxpayer. The amount that must be paid and the amount that must be collected is known by the taxpayer and the government, respectively.
    • Distribution of wealth is equal: Higher taxes are charged by the government to the individuals or organizations that can afford them. This extra money is used to help the poor and lower societies in India.

    What are the disadvantages of direct taxes?

    • Easily evadable: Not all are willing to pay their taxes to the government. Some are willing to submit a false return of income to evade tax. These individuals can easily conceal their incomes, with no accountability to the law of the land.
    • Arbitrary: Taxes, if progressive, are fixed arbitrarily by the Finance Minister. If proportional, it creates a heavy burden on the poor.
    • Disincentive: If there are high taxes, it does not allow an individual to save or invest, leading to the economic suffering of the country. It does not allow businesses/industry to grow, inflicting damage to them.

     

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  • [Sansad TV] Perspective: Dollar Dominance: Under threat?

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    Context

    As per IMF’s first deputy managing director Gita Gopinath, financial sanctions imposed on Russia threaten to gradually dilute the dominance of the U.S. dollar and could result in a more fragmented international monetary system.

    To understand more on this and related risks to the dominance of the dollar in view of the prevailing global situation and what it means for the international financial market.

    Russia- Ukraine War and USD

    • The Russia-Ukraine conflict conveys no signal of coming to an end or any tendency towards a peaceful settlement.
    • This has disrupted the global supply chain and has caused a major blow to the global economy.
    • The World Bank has reduced its annual global growth forecast for 2022 by nearly a full percentage point, from 4.1% down to 3.2%.
    • The financial sanctions imposed on Russia by the major Western powers have prompted changes in the international financial order driven by USD.
    • The United States has to some extent weaponized the dollar against Russia.
    • Countries are concerned that the money it holds in dollars would be worthless if dollar inflation set in.

    How US Dollar became the global currency?

    • The U.S. dollar has been the world’s dominant currency since the end of World War II.
    • Roughly half of international trade, international loans, and global debt securities are denominated in USD.
    • The USD became the official reserve currency of the world in 1944. The decision was made by a delegation from 44 Allied countries called the Bretton Woods Agreement.
    • Despite the challenges faced by the US economy due to fiscal and external deficits of the 1980s, the dollar’s share of global reserves remained steady and reserves even grew as time progressed.
    • The dominance of the dollar is backed by strong and highly credible institutions, deep markets and the fact that it is freely convertible.
    • Almost 40% of the world’s debt is issued in dollars. As a result, foreign banks need a lot of dollars to conduct business. This became evident during the 2008 financial crisis.

    Implications of USD led inflation

    • The dollar’s role as the world’s “reserve currency” is a cornerstone of the global economy and global finance as well as geopolitics.
    • Most of the transactions are dollar-dominated, currency depreciation is rather unlikely to increase exports.
    • A depreciation in the currency relative to the dollar leads to an increase in the price of imported goods which means high pressures on inflation.

    Challenges to USD

    • In the 1990s the dollar’s role started diminishing and the US became a net debtor to the world.
    • With the emerging global value chains, China’s integration into the world economy has been an impediment to the economic growth of the US.
    • A considerable decline in the dollar’s share can be attributed to the greater use of the Chinese renminbi.
    • It was notified by the IMF official that the dollar’s share of international reserves had fallen from 70% to 60% over a period of time with the growing trading currencies led by the Australian dollar.

    Calls for a one world currency

    • In March 2009, China and Russia called for a new global currency.
    • China is a huge player in world trade, which you might think would make people want to hold a lot of yuan assets.
    • They wanted the world to create a reserve currency that is disconnected from individual nations and is able to remain stable in the long run.
    • They thus want to remove the inherent deficiencies caused by using credit-based national currencies.
    • In the fourth quarter of 2016, the Chinese renminbi became another one of the world’s reserve currencies.
    • China wants its currency to be fully traded on the global foreign exchange markets. It would like the Yuan to replace the dollar as the global currency.

    What lies ahead?

    • For many years, undermining the dollar’s dominance has been the dream of governments that have looked uneasily at US global primacy, and formed coalitions.
    • Some experts also advocate that either China’s or Russia’s threat to the dollar hegemony will remain a fantasy.
    • It is predicted that the sanctions against Russia will not foreshadow the decline of the dollar as the reserve currency.
    • The Russia-Ukraine Conflict will definitely slow down the global economy but will not cause a global recession.