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  • A changing fiscal framework

    The article examines the changes in government’s fiscal policy stance which supports the debt-financing and apparent contradiction displayed by increased excise duty.

    Increase in excise duty

    • Well before India began to globalise there was a time when each Union Budget announced sales tax increases on tobacco products.
    • The rise in tax was expected to be a shot in the arm for the revenue-starved government of our poor country.
    • India is less poor now, having risen to the rank of an emerging market economy.
    • Yet, COVID-19 has wreaked havoc.
    • As opposed to a Budget estimate of 3.5% for fiscal deficit, the revised estimates show a 2.7 times larger deficit of 9.5% for FY 2020-21. 
    • A comparison of the government’s revised Budget estimates with the original Budget estimates reveals a fall in receipts from every source of taxation except excise.
    • The revised Budget shows a rise of ₹94,000 crore on account of excise duties alone.
    • Presumably, the increase comes from the much-debated excise duty increases on petroleum and diesel.
    • The excise duty rise will hardly compensate for the huge falls in other tax revenues.
    • The larger excise duty collection is not large enough to have significantly reduced the inflated fiscal deficit figure.

    Implications of hike in excise duty

    • Given the nature of the products on which the excise duty has gone up, prices of commodities will rise in general.
    • With annual output shrinking by an estimated 7.7%, it is straightforward to conclude that unemployment has risen significantly.
    • The accompanying price rise will be the unemployed persons’ worst nightmare.
    • The result will be severe inequality.

    Change in economic policy framework

    • The Economic Survey 2020-21 considers Olivier Blanchard’s prescription that a fiscal deficit automatically transformed to government debt.
    • Such debts along with their servicing liabilities have a tendency to magnify over the years where present borrowings keep increasing to repay past borrowings and service charges.
    • This leaves little room for growth-enhancing expenditure and reduces a government’s creditworthiness in the eyes of lenders.
    • Debt-financed fiscal spending could well be a driver of growth.
    • It can improve the standard of living of the entire population, without necessarily removing inequality.
    • A government’s fiscal expenditure, Professor Blanchard points out, has stronger multiplier effects during recessions than during booms
    • The inequality, however, could well be benignant, for even though the rich will grow richer, the poor will escape out of poverty.

    Condition for debt-financed fiscal spending

    • Debt or the fiscal deficit constitutes the government’s spendable resources.
    • What will prevent the government from sinking into a debt trap?
    • Professor Blanchard shows that the debt-to-GDP ratio can be prevented from exploding if the rate of growth of GDP happens to be higher than the sovereign rate of interest.
    • This is the case in developed economies.
    • In such economies, debt financed government expenditure will create a positive primary surplus out of which interest payments can be made to keep the debt-GDP ratio under control.
    • There will, of course, be a maximum value that this ratio can attain, a value that is higher the larger is the excess of the growth rate over the interest rate.

    Contradiction in fiscal policy and fiscal regime

    • According to the Economic Survey, India’s average interest rate and growth rate over the last 25 years (leaving out FY 2020-21) have been 8.8% and 12.8% respectively.
    • Hence, Professor Blanchard’s condition is satisfied.
    • This, of course, is not to support excise duty increases, for it goes against the very principle of the Blanchard argument.
    • Therefore, there appears to be a contradiction between the government’s announced fiscal policy stance and the fiscal regime it is actually running.

    Consider the question”The Economic Survey 2020-2021 calls for the debt-financed fiscal spending. Do you think that this view is suitable for India economy? What are the risks involved?”

    Conclusion

    The government must consider the implications of increased excise on the economy and should focus on removing the contradiction in its fiscal policy and fiscal regime.

  • NITI Aayog’s Draft National Policy on Migrant Workers

    Spurred by the exodus of 10 million migrants from big cities during the Covid-19 lockdown, the NITI Aayog has prepared a draft national migrant labour policy.

    Highlights of the Policy

    • The draft describes two approaches to policy design:
    1. To focus on cash transfers, special quotas, and reservations
    2. To enhance the agency and capability of the community and thereby remove aspects that come in the way of an individual’s own natural ability to thrive

    A rights-based approach

    • The policy rejects a handout approach, opting instead for a rights-based framework.
    • It seeks to remove restrictions on the true agency and potential of the migrant workers.
    • The goal a/c to the document should not be to provide temporary or permanent economic or social aids”, which is “a rather limited approach”.
    • Migration, the draft says, should be acknowledged as an integral part of the development and government policies should not hinder but…seek to facilitate internal migration.

    Issues with existing law

    • The 2017 report argued that specific protection legislation for migrant workers was unnecessary.
    • Migrant workers aren’t yet integrated with all workers as part of an overarching framework that covers regular and contractual work.
    • The report discussed the limitations of The Inter-State Migrant Workers Act, 1979, which was designed to protect labourers from exploitation by contractors by safeguarding their right to non-discriminatory wages.
    • It mentions that the Ministry of Labour and Employment should amend the 1979 Act for “effective utilization to protect migrants”.

    Restructuring the institutions

    The NITI draft lays down institutional mechanisms to coordinate between Ministries, states, and local departments to implement programmes for migrants.

    • Nodal agency: It identifies the Ministry of Labour and Employment as the nodal Ministry for implementation of policies, and asks it to create a special unit to help to converge the activities of other Ministries.
    • Resources centre: This unit would manage migration resource centres in high migration zones, a national labour Helpline, links of worker households to government schemes, and inter-state migration management bodies.
    • Migration corridors: On the inter-state migration management bodies, it says that labour departments of source and destination states along major migration corridors, should work together through the migrant worker cells.
    • Labour officers from source states can be deputed to destinations – e.g., Bihar’s experiment to have a joint labour commissioner at Bihar Bhavan in New Delhi.
    • Role for Panchayats: Alongside the long-term goal, policies should promote the role of panchayats to aid migrant workers and integrate urban and rural policies to improve the conditions of migration.
    • Migration management: Panchayats should maintain a database of migrant workers, issue identity cards and passbooks, and provide “migration management and governance” through training, placement, and social-security benefit assurance, the draft says.

    Ways to stem migration

    • Even as it underlines the key role of migration in development, the draft recommends steps to stem migration.
    • The draft asks source states to raise minimum wages to bring a major shift in the local livelihood of tribal that may result in stemming migration to some extent.
    • The absence of community building organisations (CBO) and administrative staff in the source states have hindered access to development programmes, pushing tribals towards migration, the draft says.
    • The “long term plan” for CBOs and panchayats should be to “alleviate distress migration policy initiatives” by aiming “for a more pro-poor development strategy in the sending areas.

    The importance of data

    • The draft calls for a central database to help employers “fill the gap between demand and supply” and ensures “maximum benefit of social welfare schemes”.
    • It asks the Ministries and the Census office to be consistent with the definitions of migrants and subpopulations, capture seasonal and circular migrants, and incorporate migrant-specific variables in existing surveys.
    • Both documents see limited merit in Census data that comes only once a decade.
    • It asked the National Sample Survey Office to include questions related to migration in the periodic labour force survey and to carry out a separate survey on migration.

    Preventing exploitation

    • The policy draft describes a lack of administrative capacity to handle issues of exploitation.
    • State labour departments have little engagement with migration issues, and are in “halting human trafficking mode”, the draft says.
    • The local administration, given the usual constraints of manpower, is not in a position to monitor.
    • This has become the breeding ground for middlemen to thrive on the situation and entrap migrants which leads to potential exploitation and trafficking.

    Specific recommendations

    • The draft asks the various ministries to use Tribal Affairs migration data to help create migration resource centres in high migration zones.
    • It asks the Ministry of Skill Development and Entrepreneurship to focus on skill-building at these centres.
    • The Ministry of Education should take measures under the Right to Education Act to mainstream migrant children’s education, to map migrant children, and to provide local-language teachers in migrant destinations.
    • The Ministry of Housing and Urban Affairs should address issues of night shelters, short-stay homes, and seasonal accommodation for migrants in cities.
    • The National Legal Services Authority (NALSA) and Ministry of Labour should set up grievance handling cells and fast track legal responses for trafficking, minimum wage violations, and workplace abuses etc.

  • Pagri Sambhaal Movement of 1907

    As a part of the ongoing farmers’ protest, groups across the country have celebrated February 23 as ‘Pagri Sambhal Diwas’.

    Try this PYQ:

    Q.What was the immediate cause for the launch of the Swadeshi movement?

    (a) The partition of Bengal done by Lord Curzon.

    (b) A sentence of 18 months rigorous imprisonment imposed on Lokmanya Tilak.

    (c) The arrest and deportation of Lala Lajpat Rai and Ajit Singh; and passing of the Punjab Colonization Bill.

    (d) Death sentence pronounced on the Chapekar brothers.

    Pagri Sambhaal Movement

    • Pagrhi Sambhaal Jatta was a successful farm agitation that forced the British government to repeal three laws related to agriculture back in 1907.
    • Bhagat Singh’s uncle Ajit Singh was the force behind this agitation, and he wanted to channel people’s anger over the farm laws to topple the colonial government.

    What were the ‘three laws’?

    • The three farm-related acts at the centre of the storm in 1907 were the Punjab Land Alienation Act 1900, the Punjab Land Colonization Act 1906 and the Doab Bari Act.
    • These acts would reduce farmers from owners to contractors of land, and gave the British government the right to take back the allotted land if the farmer even touched a tree in his field without permission.
    • Amid resentment against the laws, Bhagat Singh’s father Kishan Singh and uncle Ajit Singh, with their revolutionary friend Ghasita Ram, formed the Bharat Mata Society.
    • It worked to mobilise this unrest into a revolt against the British government.

    Repeal of the laws

    • Ajit Singh persuaded Congress leader Lala Lajpat Rai to come on the stage during a rally in Lyallpur on March 3, 1907, to protest against the laws.
    • On sensing the popular resentment, the British made a minor amendment to the laws.
    • The agitation couldn’t remain non-violent. Ajit Singh was booked for sedition after his speech at a public meeting in Rawalpindi on April 21, 1921.
    • Violence erupted soon afterwards and the British government repealed the three controversial laws in May 1907.

  • Intensified Mission Indradhanush (IMI) 3.0

    States and UTs have started the implementation of the Intensified Mission Indradhanush 3.0, a campaign aimed to reach those children and pregnant women who have been missed out or been left out of the routine immunisation.

    Do not get confused with the Mission Indradhanush for Public Sector Banks launched in 2015. It aims at revamping the functioning of the Public Sector Banks to enable them to compete with the Private Sector Banks.

    Intensified Mission Indradhanush (IMI) 3.0

    • IMI 3.0 is aimed to accelerate the full immunization of children and pregnant women through a mission mode intervention.
    • The campaign is scheduled to have two rounds of immunisation lasting 15 days (excluding routine immunisation and holidays).
    • It is being conducted in pre-identified 250 districts/urban areas across 29 States/UTs in the country.
    • Beneficiaries from migration areas and hard to reach areas will be targeted as they may have missed their vaccine doses during the pandemic.

    About the Mission Indradhanush

    • Mission Indradhanush seeks to drive towards 90% full immunisation coverage of India and sustain the same by the year 2020. It was launched in December 2014.

    Aims and objectives

    • It aims to immunize all children under the age of 2 years, as well as all pregnant women, against eight vaccine-preventable diseases.
    • The diseases being targeted are diphtheria, whooping cough, tetanus, poliomyelitis, tuberculosis, measles, meningitis and Hepatitis B.
    • In 2016, four new additions have been made namely Rubella, Japanese Encephalitis, Injectable Polio Vaccine Bivalent and Rotavirus.
    • In 2017, Pneumonia was added to the Mission by incorporating the Pneumococcal conjugate vaccine under Universal Immunisation Programme

    Try this question from CSP 2016:

    Q.‘Mission Indradhanush’ launched by the Government of India pertains to:

    (a) Immunization of children and pregnant women

    (b) Construction of smart cities across the country

    (c) India’s own search for the Earth-like planets in outer space

    (d) New Educational Policy

  • Places in news: Lake Chad

    One of Africa’s largest freshwater bodies, Lake Chad, has shrunk by 90 per cent.

    Try this PYQ from CSP 2018:

    Q.Which of the following has/have shrunk immensely/dried up in the recent past due to human activities?

    1. Aral Sea
    2. Black Sea
    3. Lake Baikal

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 and 3

    (c) 2 only

    (d) 1 and 3

    Lake Chad

    • Lake Chad in the Sahel spans the countries of Nigeria, Niger, Chad and Cameroon and is home to 17.4 million people.
    • It is blessed with rich aquatic and terrestrial biodiversity.
    • The Chari River, fed by its tributary the Logone, provides over 90% of the lake’s water, with a small amount coming from the Yobe River in Nigeria/Niger.
    • Despite high levels of evaporation, the lake is freshwater.
    • The Lake Chad basin comprises biosphere reserves, World Heritage and Ramsar sites as well as wetlands of international conservation importance.

    Why it is significant?

    • For years, the lake has been supporting drinking water, irrigation, fishing, livestock and economic activity for over 30 million people in the region.
    • It is vital for indigenous, pastoral and farming communities in one of the world’s poorest countries.
    • However, climate change has fuelled a massive environmental and humanitarian crisis.
    • The United Nations has termed the Lake Chad crisis as “one of the worst in the world”.

    A looming peril

    • The lake has shrunk 90 per cent over the last 60 years since the chronic droughts surged at the beginning of the 1970s.
    • The surface area of the lake was 26,000 square kilometres in 1963; it has now reduced to less than 1,500 square kilometres.
    • Its population is exploding and the region has been ripped apart from conflict at an unprecedented scale.

    Behind all crises

    • The ever-changing climate has dramatically worsened the situation, amplifying food and nutritional insecurity in the region.
    • Temperature is rising one-and-a-half times faster than the global average. The seasonal and inter-rainfall patterns have been drastically changing each year.
    • This has triggered food insecurity, ultimately pushing communities into the arms of terrorist groups.
    • Boko Haram is one of the top insurgent groups with a strong foothold in the region.

  • Fifteenth Finance Commission has increased proportion of grants conditional on reforms

    The article highlights the crucial recommendations made by the 15th Finance Commission and also explains the importance of conditions for grants from the Centre to push the state for reforms.

    Crucial recommendations by 15th Finance Commission

    • The Fifteenth Finance Commission’s report for the period 2021-22 to 2025-26 outlines some crucial recommendations for state governments.
    • These recommendations cover tax devolution, grants from the Centre, and the guidelines for the borrowings that they are permitted to incur over the medium-term.
    • The commission has recommended that 41 per cent of the government’s divisible pool of taxes be transferred to state governments.

    Horizontal devolution formula

    • The horizontal devolution formula specifies each state’s share in the overall pie.
    • The 15th FC was required to use the states’ population as per the 2011 Census — a highly contentious change.
    • It has also introduced a demographic performance criterion.
    • Additionally, it has also introduced a new criterion –tax effort.
    • Tax effort is measured by the ratio of the three-year average of per-capita own tax revenues and per-capita gross state domestic product (GSDP).
    • The net result of the change in criteria is that the share of 10 states in the divisible pool has declined.
    • Karnataka is the biggest loser, while Maharashtra is the biggest gainer.

    Grants from the Centre conditioned on reforms in states

    • Another major set of the commission’s recommendations pertain to grants from the Centre.
    • In a major shift, the 15th FC has sharply increased the proportion of grants whose receipt is conditional on specified reforms being undertaken.
    • 57 per cent of the 15th FC-recommended grants accepted so far by the GoI are conditional, relative to just 17 per cent for the 14th FC (including J&K).

    What are the conditions

    1) Setting up of State Finance Commission (SFC) and applicability of SFC’s recommendations for 5 years only

    • Constitution requires state governments to set up State Finance Commissions (SFC).
    • The 15th FC has asserted that the mandate of any given SFC is intended to be applicable only for five years.
    • It revealed that only 15 states have set up their fifth or sixth SFCs, whereas several states have not moved beyond their second or third SFC.
    • Accordingly, a staggering 84 per cent of the Rs 4.4 trillion grants for local bodies recommended by the 15th FC are conditional on the states setting up SFCs for the coming five-year period, and acting on their recommendations by March 2024.

    2) Availability of online accounts

    • Another entry-level condition for availing grants by rural and urban local bodies pertains to the timely availability of their accounts online from 2021-22 onwards.

    3) Notiflying floor rate for property tax

    • For the receipt of grants by the urban bodies, states are required to notify a floor rate for property tax by 2021-22, and demonstrate consistent year-wise improvement from 2022-23 onwards.
    • This will complement the conditions set previously by SEBI for ULBs to become eligible to raise municipal bonds.

    Changes in limit on net borrowings of state governments

    • The commission has recommended that the normal limit for net borrowings of state governments be fixed at 4 per cent of GSDP in 2021-22.
    • This will ease to 3.5 per cent by 2022-23, thereafter reverting to the erstwhile 3 per cent limit till 2025-26.
    • The additional borrowing space of 0.5 per cent of GSDP for states is conditional on the completion of power sector reforms.

    Prospect of huge gaps in states’ revenue in the future

    • The states’ fiscal arithmetic will alter in 2022-23 with the GST compensation set to cease at the end of June 2022 as things stand today.
    • The ensuing drop in grants, combined with the tapering of the front-loaded revenue deficit grants is likely to leave a big gap in some states’ revenues.

    Consider the question “What are the conditions laid down by the 15th Finance Commission on the states for the central grants? How these conditions could benefit the states?”

    Conclusion

    The question is whether this revenue gaps will force the states to move on both the power sector reforms, which have proven challenging in the past, and the municipal reforms, so that their resource availability may be enhanced.

  • Carbon Watch: India’s first app to assess one’s carbon footprint

    Chandigarh became the first state or UT in India to launch Carbon Watch, a mobile application to assess the carbon footprint of an individual.

    Carbon Footprint

    • A carbon footprint is the total greenhouse gas (GHG) emissions caused by an individual, event, organization, service, or product, expressed as carbon dioxide equivalent.
    • It corresponds to the whole amount of greenhouse gases (GHG) produced to, directly and indirectly; support a person’s lifestyle and activities.
    • Carbon footprints are usually measured in equivalent tons of CO2, during the period of a year, and they can be associated with an individual, an organization, a product or an event, among others.
    • The GHGs whose sum results in a carbon footprint can come from the production and consumption of fossil fuels, food, manufactured goods, materials, roads or transportation.

    Note: An ecological footprint, as explained earlier compares the total resources people consume with the land and water area that is needed to replace those resources. A carbon footprint also deals with resource usage but focuses strictly on the greenhouse gases released due to burning of fossil fuels.

    How does the app Carbon Watch work?

    • As a person downloads the application, they will need to fill details in four parts — Water, Energy, Waste Generation and Transport (Vehicular movement).
    • In the category of Water, the person will be required to inform about the consumption of water.
    • In the Energy category, the details regarding the electricity units consumed every month at the house, monthly bill etc and usage of solar energy will have to be furnished.
    • In the Waste category, the individual will need to inform about the waste generated on their part and their family.
    • In the transport section, the individual will have to inform about the mode of transport used by four-wheeler, two-wheeler or bicycle.

    Try this PYQ:

    As a result of their annual survey, the National Geographic Society and an international polling firm GlobeScan gave India top rank in Greendex 2009 score. What is this score?

    (a) It is a measure of efforts made by different countries in adopting technologies for reducing the carbon footprint

    (b) It is a measure of environmentally sustainable consumer behavior in different countries

    (c) It is an assessment of programs/schemes undertaken by different countries for improving the conservation of natural resources

    (d) It is an index showing the volume of carbon credits sold by different countries

  • What are Non-Alcoholic Fatty Liver Diseases (NAFLD)?

    The Union Govt has integrated the Non-alcoholic fatty liver disease (NAFLD) in the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Stroke.

    Try this MCQ:

    Q.A Company marketing food products advertises that its items do not contain trans-fats. What does this campaign signify to the customers?

    1. The food products are not made out of hydrogenated oils.
    2. The food products are not made out of animal fats/oils.
    3. The oils used are not likely to damage the cardiovascular health of the consumers.

    Which of the statements given above is/are correct?

    (a) Only 1

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    NAFLD

    • NAFLD is the abnormal accumulation of fat in the liver in the absence of secondary causes of fatty liver, such as harmful alcohol use, viral hepatitis, or medications.
    • According to doctors, it is a serious health concern as it encompasses a spectrum of liver abnormalities.
    • It can cause non-alcoholic fatty liver (NAFL, simple fatty liver disease) to more advanced ones like non-alcoholic steatohepatitis (NASH), cirrhosis and even liver cancer.

    Why such a move?

    • NAFLD is emerging as an important cause of liver disease in India.
    • Epidemiological studies suggest the prevalence of NAFLD is around 9% to 32% of the general population in India with a higher prevalence in those with overweight or obesity and those with diabetes or prediabetes.
    • Researchers have found NAFLD in 40% to 80 % of people who have type 2 diabetes and in 30% to 90% of people who are obese.
    • Studies also suggest that people with NAFLD have a greater chance of developing cardiovascular disease.
    • Cardiovascular disease is the most common cause of death in NAFLD.

  • [pib] One Nation One Standard Mission

    It’s time to embark on Mission “One Nation One Standard” and make India the leader in setting global benchmarks in setting standards, highlighted the Food and Consumer Affairs Minister.

    One Nation One Standard

    • The purpose of setting standards and enforcing them is not to bring back “inspection raj” but to ensure that quality products are made available to consumers.
    • The Bureau of Indian Standards (BIS), the only national body that frames standards, has come out with more than 20,000 standards for various products and services so far.
    • Besides this, there are about 50-odd agencies that have framed about 400 standards in the country.
    • There are multiple standards in the country for a single product/service. The new mission is to converge such standards with the BIS.

    Main objectives:

    • No one should feel the need to go abroad to get the quality certification.
    • Lab testing in India should be of world standards. Modern equipment and the latest technologies would be used there.

    Why such a move?

    • Having uniform national standards will help in making it mandatory for more products.
    • The government proposes to set Indian standards in line with the global benchmarks, just like other countries enforce their standards on imported products.
    • The Centre, through this move, wants foreign goods coming into India to comply with Indian standards.

    Try this PYQ:

    Consider the following statements:

    1. The Standard Mark of the Bureau of Indian Standards (BIS) is mandatory for automotive tyres and tubes.
    2. AGMARK is a quality Certification Mark issued by the Food and Agriculture Organisation (FAO).

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Back2Basics: Bureau of Indian Standards (BIS)

    • BIS is the National Standards Body of India working under the aegis of the Ministry of Consumer Affairs, Food & Public Distribution.
    • It is established by the Bureau of Indian Standards Act, 1986 which came into effect on 23 December 1986.
    • The organisation was formerly the Indian Standards Institution (ISI), set up under the Resolution of the Department of Industries and Supplies in September 1946.
    • The ISI was registered under the Societies Registration Act, 1860.
    • A new Bureau of Indian standard (BIS) Act 2016 has been brought into force with effect from 12 October 2017.
    • The Act establishes the Bureau of Indian Standards (BIS) as the National Standards Body of India.

  • [pib] SFURTI Scheme

    Union Minister for MSME has inaugurated 50 artisan-based SFURTI clusters, spread over 18 States.

    SFURTI is an off-track scheme compared to other HRD schemes with Hindi acronyms. Similar is the SPARSH scheme for philately.

    SFURTI Scheme

    • Scheme of Fund for Regeneration of Traditional Industries (SFURTI) is an initiative by the Ministry of MSME to promote Cluster development.
    • Khadi and Village Industries Commission (KVIC) is the Nodal Agency for the promotion of Cluster development for Khadi.
    • Under the Scheme, the MSME Ministry supports various interventions including the setting up of infrastructure through Common Facility Centers (CFCs), procurement of new machinery, design intervention, improved packaging and marketing etc.

    Types of clusters

    • SFURTI clusters are of two types i.e., Regular Cluster (500 artisans) with Government assistance of up to Rs.2.5 crore and Major Cluster (more than 500 artisans) with Government assistance up to Rs.5 crore.
    • The scheme focuses on strengthening the cluster governance systems with the active participation of the stakeholders so that they are able to gauge the emerging challenges and opportunities and respond to them.