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Distribution: yearly

  • Court shifts the tide on stray dog policy  

    Why in the news?

    The Supreme Court ended the 15-year-old (Animal Welfare Board of India & Anr Versus People for Elimination of Stray Troubles & Ors) AWBI vs. PEST case on July 12, after the final hearing on May 9, sparking mixed reactions.

    The Prevention of Cruelty to Animals (PCA) Act, 1960, and the Animal Birth Control (ABC) Rules are:

    • The PCA Act, 1960 was enacted by the Parliament of India to prevent the infliction of unnecessary pain or suffering on animals and to amend the laws relating to the prevention of cruelty to animals.
      • The PCA Act, 1960 and ABC Rules, 2001 prohibit the killing of stray dogs and mandate sterilization as the only scientific and humane method of controlling stray dog populations.
      • The new ABC Rules, 2023 notified under the PCA Act, 1960 also prohibit wanton killing of stray dogs by municipalities and require them to follow sterilization.
    • The Act defines “animal” as any living creature other than a human being. It establishes the Animal Welfare Board of India to promote animal welfare.
    • Chapter III of the Act lists different forms of cruelty to animals that are banned, including those related to work animals, captivity, ownership, abuse, mutilation or killing.
    • Chapter IV deals with experiments on animals. While it does not make experiments unlawful for the advancement of knowledge, it allows the Board to advise the government to create a committee to control and supervise such experiments.
    • Chapter V outlines restrictions, procedures and offences related to performing animals. The Central Government can prohibit any animal from exhibition or training through notification.

    Note: In 2022, the Ministry of Fisheries, Animal Husbandry and Dairying submitted a draft Prevention of Cruelty to Animals (Amendment) Bill 2022 for public comment. The draft includes 61 amendments to further clarify the law and make punishments more stringent.

    The Supreme Court stated that the Central law (PCA Act 1960 and ABC Rules, 2023) which prohibits killing of stray dogs by local authorities remains the governing law of the land.

    What the Supreme Court said on the ‘Duty of every Citizen’:

    • The Supreme Court capped off the judgment with the lines: “Compassion to all living beings, is the enshrined Constitutional value and mandate, and cast obligation on the authorities to maintain.”
      • This refers to Article 51A(g) of the Constitution of India which states: “It shall be the duty of every citizen of India to protect and improve the natural environment including forests, lakes, rivers, and wildlife and to have compassion for living creatures.”
    • The court emphasized that Citizens should avoid unscientific and cruel methods like killing stray dogs and instead choose the scientific and humane method of sterilization.

    Issues due to stray dogs in India: 

    • Population: India has an estimated 60 million stray dogs, making it the country with the highest number of stray dogs globally.
    • Rabies Incidence: India accounts for 36% of global rabies deaths and 65% of rabies deaths in the South-East Asia region.
      • Between 2012 and 2022, the National Rabies Control Program reported 6,644 clinically suspected cases of rabies in humans.
    • Dog Bite Cases: Reports indicate that major cities have seen alarming numbers of dog bite incidents. For example, Delhi’s Safdarjung Hospital and Ram Manohar Lohia Hospital recorded nearly 48,000 dog bite cases in just six months. In Kerala alone, there were over 1.9 lakh dog bite cases last year, with 21 deaths attributed to rabies.

    Way forward:

    • Enhanced Public Awareness and Education: Need to implement nationwide campaigns to educate the public on responsible pet ownership, the importance of sterilization, and the humane treatment of stray dogs.
    • Strengthening Enforcement of Existing Laws: Need to ensure that municipalities and local authorities are adequately trained and funded to implement the ABC Rules effectively.

  • A closer look at beefng up Jammu’s counter-terror grid    

    Why in the news?

    The Jammu region has faced severe security issues recently, exacerbated by troop redeployment to the LAC. To address this, around 3,500 additional troops and Special Forces were deployed.

    Present Context of J&K

    • Security Concerns: The Jammu region has seen a resurgence in terrorist activities, with security forces suffering significant losses. The situation has deteriorated, particularly following the redeployment of troops to the Line of Actual Control (LAC) after the Galwan incident in June 2020.
    • Increased Military Presence: In response to the rising threats, additional troops, including Special Forces and Assam Rifles, have been inducted into the region to bolster counter-terrorism operations.
      • Following the abrogation of Article 370 in 2019, there has been a strategic shift in militancy from Kashmir to Jammu, with militants adapting their tactics and increasing their operational activities in districts like Reasi, Rajouri, and Poonch.

    Need to Establish the Grid System in Vulnerable Areas

    • Establishing a counter-terrorism grid involves deploying military units strategically in vulnerable areas to dominate potential terrorist movements. This requires thorough threat assessments based on terrain, local population inclinations, and historical data.
    • The grid system emphasizes the importance of winning the trust of the local population through community engagement, which is crucial for gathering intelligence on terrorist activities.

    Challenges

    • Integration of New Troops: Newly inducted troops face the challenge of quickly orienting themselves to the local terrain and population dynamics.
    • Divided Local Population: The local population is divided into subsets that either support the state, support terrorists, or remain neutral. 
      • Gaining the support of the neutral majority is critical for the success of counter-terrorism efforts.
    • Operational Control: Recent trends show a shift in operational control from battalion-level commanders to higher command levels, which can hinder effective and timely responses to emerging threats.

    About Operation Dudhi

    • Historical Context: Operation Dudhi, conducted in May 1991 by the 7 Assam Rifles, is remembered as a successful counter-terrorism operation in the Chowkibal area. It showcased the effectiveness of battalion-level command in conducting operations.
    • Lessons Learned: The operation highlighted the importance of allowing commanding officers to maintain control over their units.
      • Recent trends of centralizing control may undermine operational effectiveness and responsiveness.
    • Need for Integrated Deployment: The success of future operations requires that newly inducted troops be deployed as integral units under existing command structures, rather than in a fragmented manner, to enhance operational coherence and effectiveness.

    Way forward: 

    • Enhance Human Intelligence Networks: It is crucial to build robust human intelligence networks by integrating local informants and community members into counter-terrorism efforts.
    • Integrated Deployment of Forces: Newly inducted troops should be strategically integrated with existing units to create a cohesive counter-terrorism grid. This approach will facilitate knowledge sharing and operational synergy, allowing new troops to quickly acclimatize to the local environment and build relationships with the community.

  • What is the Yen Carry Trade? Why is it unwinding right now?

    Why in the news?

    The global stock and bond markets, especially Japan’s, are experiencing turmoil due to the unwinding of the immensely popular yen carry trade.

    What is Yen carry trade?

    • The yen carry trade is a popular currency trading strategy that involves borrowing Japanese yen at low interest rates and using the funds to invest in higher-yielding assets denominated in other currencies, with the goal of profiting from the interest rate differential.

    Why is it unwinding right now?

    • Strengthening Yen: The Japanese yen has appreciated significantly, rising over 3% against the dollar after the Bank of Japan (BoJ) raised interest rates to 0.25% and announced a reduction in bond purchases. This strengthening of the yen diminishes the profitability of the carry trade, which relies on a weaker yen to remain viable.
    • Interest Rate Changes: Expectations of imminent interest rate cuts by the U.S. Federal Reserve have contributed to the dollar’s weakness, further impacting the carry trade. As the interest rate differential narrows, the incentive to maintain yen carry positions decreases.

    How does it work?

    • Mechanism: The yen carry trade involves borrowing yen at low interest rates and converting it into higher-yielding currencies. Investors use the borrowed yen to purchase assets in currencies that offer better returns, such as U.S. dollars or Australian dollars.
    • Investors typically aim for annualized returns of around 5% to 6% on dollar-yen carry trades, which is the difference between U.S. and Japanese interest rates. The strategy can be lucrative as long as the yen does not appreciate significantly against the currencies in which the investments are made.

    How did it begin?

    • The yen carry trade can be traced back to 1999 when Japan lowered its policy rates to zero following an asset price bubble burst. This led Japanese investors to seek better returns in international markets, effectively turning Japan into the world’s largest creditor nation.
    • The contemporary form of the carry trade gained prominence in 2013 under Prime Minister Shinzo Abe’s quantitative easing policies, coinciding with rising U.S. rates and a depreciating yen. This trend intensified in 2022 and 2023 as the Federal Reserve raised rates rapidly while the Bank of Japan maintained negative short-term rates.

    How large Is It?

    • The estimated size is about $350 billion in short-term external loans by Japanese banks attributed to yen-funded carry trades. However, this figure may not fully capture the extent of the trades, as it could include commercial transactions or loans to foreign businesses.
    • The actual size of yen carry trades could be larger due to the leverage used by hedge funds and computer-driven funds.

    Is it coming to an end?

    • The Bank of Japan has recently started raising rates, which has led to a stronger yen. As a result, the yield gap between Japanese and other currencies has narrowed, diminishing the profitability of carry trades.
    • The appreciation of the yen (by about 13% in a month) has prompted leveraged investors to unwind their positions, leading to a sell-off in global stock and bond markets. This unwinding is driven by the need to repay yen loans as the currency strengthens, causing further declines in asset prices internationally.

    Conclusion: The yen carry trade is unwinding due to the strengthening yen and narrowing interest rate differentials. As the yen appreciates, profitability decreases, prompting investors to exit positions, leading to global market sell-offs. This trend signifies a shift in monetary policies and changing economic conditions affecting currency trading strategies.

  • [pib] Nandini Sahakar Yojana

    Why in the News?

    • The Minister of Cooperation has provided some information about the Nandini Sahakar Yojana.
      • NCDC has cumulatively disbursed financial assistance amounting to Rs. 6426.36 crore for the development of cooperative societies exclusively promoted by women across the country.

    About Nandini Sahakar Yojana

    • The Nandini Sahakar Scheme was initiated by the National Cooperative Development Corporation (NCDC) in 2010.
    • It is a women-focused framework providing financial assistance, project formulation, hand-holding, and capacity development.
    • The scheme aims to assist women cooperatives in undertaking business model-based activities under the purview of NCDC.

    Features of the Scheme

    • Any cooperative society with at least 50% women as primary members and a minimum of three months in operation is eligible to apply.
    • Assistance is provided in the form of credit linkage for infrastructure term loans and working capital, along with subsidies or interest subvention from other government schemes.
    • There is no minimum or maximum limit on financial assistance for projects by women cooperatives.
    • NCDC offers a 2% interest subvention on its rate of interest on term loans for new and innovative activities.
    • A 1% interest subvention is provided on term loans for all other activities, resulting in lower borrowing costs for women cooperatives.

  • The hormone Oestrogen

    Why in the News?

    • “Osteoporosis” is a condition where bones become weak and brittle, with over 10 million cases annually in India.
      • It predominantly affects ageing women due to decreased oestrogen levels post-menopause.
    A recent study in Nature by researchers at the Universities of California uncovered a brain-derived hormone, CCN3, which increases bone mass in postpartum lactating mothers.

     

    What is Oestrogen?

      • Oestrogen is a primary female sex hormone essential for reproductive and sexual development.
      • It regulates the menstrual cycle and is crucial for the development of secondary sexual characteristics like breast development. 
      • Oestrogen also plays a vital role in maintaining bone density and cardiovascular health.
    • It is produced mainly in the ovaries but also in smaller amounts by the adrenal glands and fat tissue. 
    • The hormone influences various tissues, including the brain, heart, skin, and bones.
    • Imbalances in oestrogen levels can lead to various health issues, such as osteoporosis and cardiovascular disease.

    Role of Oestrogen in Bone Growth

    • Oestrogen is crucial for bone growth and formation, acting as a manager signaling the bone construction crew.
    • During breastfeeding, oestrogen production drops to focus on milk production, which should weaken bones.
    • Contrary to expectations, mothers’ bones become stronger to meet their babies’ high calcium demands.

    How does the ‘Hidden’ Hormone Keep Mice Mothers’ Bones Healthy?

    • During breastfeeding, the body suppresses oestrogen production to focus on milk production, which should weaken bones.
    • Despite low oestrogen, mothers’ bones strengthen.
    Researchers found that KISS1 neurons in the hypothalamus (a part of the brain) release the CCN3 hormone, which helps maintain and even increase bone mineralisation.

    Experimental Findings:

    • In experiments with genetically modified mice, those lacking the oestrogen receptor alpha still maintained healthy bones due to CCN3.
    • When CCN3 was introduced to skeletal stem cells, it significantly increased bone formation, showing its potential to strengthen bones independently of oestrogen.

    PYQ:

    [2019] ‘RNA interference (RNAi)’ technology has gained popularity in the last few years. Why?

    1. It is used in developing gene silencing therapies.
    2. It can be used in developing therapies for the treatment of cancer.
    3. It can be used to develop hormone replacement therapies.
    4. It can be used to produce crop plants that are resistant to virtual pathogens.

    Select the correct answer using the code given below.

    (a) 1, 2 and 4

    (b) 2 and 3

    (c) 1 and 3

    (d) 1 and 4 only

  • Inaugural Rashtriya Vigyan Puraskar, 2024 announced 

    Why in the News?

    G Padmanabhan, the Chandrayaan-3 team, Annapurni Subramaniam, and 30 others have been chosen for the inaugural Rashtriya Vigyan Puraskar (RVP), India’s new national science awards established last year.

    What is Rashtriya Vigyan Puraskar?

    • The RVP comprises four awards:
    1. Vigyan Ratna for lifetime achievement.
    2. Vigyan Shri for scientists of all ages.
    3. Vigyan Yuva for scientists under 45 years.
    4. Vigyan Team for collaborative research work.
    • These awards were instituted last year, replacing all existing science awards, including the prestigious Shanti Swarup Bhatnagar Prize.
    • The Vigyan Yuva now serves as a replacement for the Bhatnagar Prize, which also recognized outstanding scientists below 45 years.

    Ceremony Details:

    • These awards shall be announced on the National Technology Day (11th May) every year.
    • The Award Ceremony for all categories of awards shall be held every year on the National Space Day on 23rd August.
    • The Hon’ble President of India / The Hon’ble Vice President of India may confer the Awards.

    Notable Awardees

    • G Padmanabhan: At 86, G Padmanabhan, a renowned biochemist known for his work on the malaria parasite, has been named a Vigyan Ratna, recognizing his lifetime achievement in science. Padmanabhan is a towering figure in Indian science and has been honored with the Padma Shri and Padma Bhushan.
    • Chandrayaan-3 Team: The team behind Chandrayaan-3, which successfully landed India’s first spacecraft on the Moon last year, has been awarded the Vigyan Team award for their collaborative research work.
    • Vigyan Yuva Puraskar Recipients:
      • Vivek Polshettiwar (Tata Institute of Fundamental Research, Mumbai): A chemist working on carbon capture technologies.
      • Urbasi Sinha (Raman Research Institute, Bengaluru): A leading expert in quantum research.
      • Roxy Mathew Koll (Indian Institute of Tropical Meteorology, Pune): A climate scientist.
    • Annapurni Subramaniam:
      • Among the 13 scientists selected for the Vigyan Shri award, Annapurni Subramaniam’s main research focuses on the formation and evolution of star clusters and galaxies.
    • Other Vigyan Shri Recipients:
      • Jayant Bhalchandra Udgaonkar: A biologist and former director of IISER Pune.
      • Naba Kumar Mondal: A particle physicist from Saha Institute of Nuclear Physics, Kolkata.

    PYQ:

    [2009] For outstanding contribution to which one of the following fields is Shanti Swarup Bhatnagar Prize given?

    (a) Literature

    (b) Performing Arts

    (c) Science

    (d) Social Service

  • On UP’s stringent Anti-conversion law     

    Why in the news?

    The UP Assembly’s amendments to its regressive ‘Anti-conversion’ law appear aimed at facilitating misuse, with over 400 cases registered since the original 2021 law.

    What is UP’s ‘Anti-conversion’ law?

    • Uttar Pradesh’s “Anti-conversion” law, officially known as the Uttar Pradesh Prohibition of Unlawful Conversion of Religion Act, 2021, prohibits religious conversion through unlawful means such as misrepresentation, force, undue influence, coercion, allurement, or fraudulent means.

    Why was the Original 2021 Anti-Conversion Law Amended by UP?

    • Increased Stringency: The amendments aim to make the original law more stringent, responding to claims of rising cases of forced conversions and the alleged involvement of foreign and anti-national elements in demographic changes.
    • Response to Public Discontent: The government cited the need to enhance penalties and legal measures to prevent unlawful conversions, particularly concerning vulnerable groups such as minors and women.
    • Legitimacy of Complaints: The amendment allows third parties to file complaints about alleged unlawful conversions, expanding the scope of the law and potentially increasing its application against inter-faith marriages.

    What are Its concerning features?

    • Harsh Penalties: The amended law introduces severe penalties, including imprisonment of up to 20 years or life for targeting minors, women, or certain communities through coercion or force.
    • Bail Conditions: The law imposes stringent bail conditions that make it difficult for accused individuals to secure bail, requiring public prosecutor consent and a presumption of guilt.
    • Third-Party Complaints: The provision allowing anyone to file complaints against alleged conversions opens the door for misuse by communal organizations and individuals with vested interests, potentially targeting inter-faith couples.

    What does it state about bail conditions and ‘foreign funding’?

    • Bail conditions: The amended law states that an accused individual cannot be granted bail unless the public prosecutor has the opportunity to oppose it, and there is reason to believe the accused is not guilty and unlikely to repeat the offence.
    • Foreign funding: The law prescribes stiff penalties for receiving funds from foreign organizations for unlawful conversion, with fines and imprisonment aimed at deterring financial support for conversion activities.

    How is it different from other states?

    • Comparison with Other States: While several states like Odisha and Madhya Pradesh have anti-conversion laws, Uttar Pradesh’s amendments are notably harsher, including provisions for life imprisonment, which are not present in other states.
    • Bail and Proof Burden: Other states may not impose such severe bail conditions or the reverse burden of proof required in Uttar Pradesh, making it easier for accused individuals in those states to secure bail.
    • Scope of Complaints: In many states, only aggrieved individuals or their close relatives can file complaints, whereas Uttar Pradesh’s amendments allow for broader third-party complaints, increasing the potential for misuse.

    Way forward:

    • Promote Awareness of Rights: Implement comprehensive public awareness campaigns to educate citizens about their legal rights concerning religious conversion and inter-faith marriages.
    • Legal and Constitutional Review: Stakeholders, including civil society organizations and legal experts, should actively pursue legal challenges against the amended law in the Supreme Court of India.

  • Counting the ‘poor’ having nutritional deficiency       

    Why in the news?

    The National Sample Survey Office has released the Household Consumption Expenditure Survey (HCES) report for 2022-23, along with public access to unit-level data on household expenditures.

    What does the recent NSSO Report tell us?

    • The report utilizes various definitions of poverty established by past committees, with the poverty line (PL) being anchored to calorie norms of 2,400 kcal for rural and 2,100 kcal for urban areas as per the Lakdawala Committee. The Rangarajan Committee’s approach considers broader normative levels, including non-food expenses.
    • The average per capita calorie requirement (PCCR) is estimated at 2,172 kcal for rural and 2,135 kcal for urban populations. The report highlights that the average per capita calorie intake (PCCI) for the poorest segments falls significantly below these requirements, indicating nutritional deficiencies.
    • The total monthly per capita consumption expenditure (MPCE) thresholds are set at ₹2,197 for rural and ₹3,077 for urban areas, with proportions of the population identified as ‘poor’ being 17.1% in rural and 14% in urban contexts. If non-food expenditures for the poorest 10% are considered, these thresholds rise, increasing the proportion of the deprived.

    Approach for measurement is the Issue:

    • Defining Poverty: The report defines the poor based on MPCE, which is linked to the ability to purchase essential food and non-food items.
      • The reliance on MPCE does not adequately address nutritional needs. While the poverty line is linked to the ability to purchase food and non-food items.
    • Caloric Requirement Calculation: The PCCR is derived from the ICMR-National Institute of Nutrition’s latest recommendations, weighted by the population distribution across age-sex-activity categories.
      • The ICMR-National Institute of Nutrition’s (ICMR-NIN) recommendations for caloric requirements in India are derived from the Recommended Dietary Allowances (RDA) for Indians.
      • The RDA does not adequately account for regional and cultural differences in dietary habits and food availability.
    • Fractile Class Analysis: Households are categorized into 20 fractile classes based on MPCE, allowing for the calculation of average PCCI and MPCE for each class.
      • Each fractile class represents 5% of the population, allowing for a detailed understanding of expenditure distribution and nutritional intake variations within the population
      • MPCE reflects consumption patterns but does not capture the full spectrum of economic well-being or deprivation.
    • State-Specific Adjustments: The all-India thresholds are adjusted for regional price differences to derive state-specific MPCE thresholds.
      • The methodology for deriving state-specific MPCE thresholds relies on regional price indexes, which can vary significantly in their construction and accuracy.

    Recommendations for Improving Nutritional Levels (Way Forward) 

    • Nutritional Schemes: Govt. needs to develop and expand schemes specifically aimed at improving the nutritional intake of the poorest households.
    • Awareness and Education: Govt. should increase awareness about nutrition and healthy eating practices among low-income households.
    • Subsidized Food Programs: Need to enhance access to subsidised food items to ensure that households can meet their caloric and nutritional needs.
    • Monitoring and evaluation: Govt. should establish robust mechanisms to monitor the effectiveness of nutritional interventions and adjust strategies as necessary.

    Conclusion: ​​The NSSO HCES 2022-23 report reveals significant nutritional deficiencies among the poorest. To align with SDG goals, expanding targeted nutritional schemes, subsidized food programs, and robust monitoring is essential.

    Mains PYQ: 

    Q How far do you agree with the view that the focus on the lack of availability of food as the main cause of hunger takes the attention away from ineffective human development policies in India? (2013)

  • RBI Report on Currency and Finance (RCF), 2023-24

    Why in the News?

    The Reserve Bank of India (RBI) released the “Report on Currency and Finance (RCF)” for the year 2023-24 with the theme – India’s Digital Revolution.

    What is the Report on Currency and Finance (RCF)? 

    • The RCF is an annual publication by the Reserve Bank of India (RBI).
    • It covers various aspects of the Indian economy and financial system, providing insights and analysis on current economic conditions, financial stability, and policy issues.
    • The theme for the 2023-24 report is “India’s Digital Revolution.”
    • Focus: It focuses on the transformative impact of digitalization across various sectors in India, especially in the financial sector.
    • Highlights: The report highlights how digital technologies are reshaping economic growth, financial inclusion, public infrastructure, and the regulatory landscape. It also addresses the opportunities and challenges associated with digitalization.

    Key Highlights of the RCF:

    [1] Digital Revolution

    • The RCF emphasizes India’s leading role in the global digital revolution.
    • With robust digital public infrastructure (DPI), evolving institutional frameworks, and a tech-savvy population, India has emerged as a frontrunner in this arena.
    • Key initiatives such as Aadhaar, the world’s largest biometric-based identification system, and the UPI, a real-time, low-cost transaction platform, have revolutionized service delivery and financial inclusion.

    [2] Digitalization in Finance

    • The above-discussed initiatives have made retail payments faster and more convenient, while the RBI’s pilot runs of the E-Rupee position India at the forefront of digital currency initiatives.
    • The digital lending ecosystem is also vibrant, with the Open Credit Enablement Network and the Open Network for Digital Commerce (ONDC) driving growth.

    [3] Remittance Inflows in India

    • India continues to lead as the highest remittance recipient globally, with US$ 115.3 billion in 2023, accounting for 13.5% of the world’s total remittances.
    • The RCF highlights that more than half of India’s inward remittances in 2021 came from the Gulf countries, with North America contributing 22%.
    • The remittance-to-GDP ratio for India has risen from 2.8% in 2000 to 3.2% in 2023, surpassing the gross FDI inflows to GDP ratio of 1.9% in 2023.
    • Looking forward, India is poised to remain a leading supplier of labor, with its working-age population expected to rise until 2048, potentially propelling remittances to around $160 billion by 2029.

    [4] Smartphones Penetration

    • India’s mobile penetration has seen remarkable growth, with internet penetration reaching 55% in 2023 and an increase of 199 million internet users over the past three years.
    • The cost per gigabyte of data in India is the lowest globally, at an average of Rs. 13.32 per GB.
    • India has one of the highest mobile data consumption rates worldwide, with an average per-user per-month consumption of 24.1 GB in 2023.
    • The number of smartphone users in India was about 750 million in 2023, expected to reach 1 billion by 2026. 
    • The RCF projects that India will become the second-largest smartphone manufacturer within the next 5 years.

    PYQ:

    [2017] Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

    (a) Mobile wallets will not be necessary for online payments.
    (b) Digital currency will replace physical currency in about two decades.
    (c) FDI inflows will drastically increase.
    (d) Direct transfer of subsidies to poor people will become very effective.

  • GST on Health and Life Insurance Premiums

    Why in the News?

    • Insurance premiums on health and life policies have increased this year, and the 18% Goods and Services Tax (GST) has made insurance less affordable for many people.
      • Medical inflation, estimated at 14% towards the end of last year, along with increased premiums, has made buying medical insurance difficult for many.

    What is the GST on Health and Life Insurance Premiums?

    • GST replaced all indirect taxes like service tax and cess from July 1, 2017.
    • Currently, GST on health and life insurance policies is fixed at 18%.
    • According to the formula, the Centre collects 9% GST with a matching collection by states.
      • Before GST, life insurance premiums were subject to 15% service taxes, including Basic Service Tax, Swachh Bharat cess, and Krishi Kalyan cess.

    Rational behind the Tax

    • GST Council Recommendations:
      • GST rates and exemptions on all services, including insurance, are prescribed on the recommendations of the GST Council, which includes the Union Finance Minister and ministers nominated by state governments.
      • Insurance is considered a service, and policyholders pay tax on their premiums, generating significant revenue for the government.
    • Tax Deductions:
      • Insurance policies allow certain deductions while computing income tax under Sections 80C and 80D of the Income Tax Act, 1961. Customers can avail deductions on the premium, including the GST applicable.

    Arguments for Withdrawing the GST on Premiums

    • High Premium Increases:
      • Significant increases in premiums on health insurance policies this year have been observed, with some public sector insurers hiking premiums by 50%.
      • The renewal rate of policies is declining due to frequent premium hikes and medical inflation.
    • Comparative GST Rates:
      • The Confederation of General Insurance Agents’ Associations of India points out that GST on insurance in India is the highest in the world.
      • The high GST rate is seen as a deterrent to insurance penetration, which conflicts with the goal of “Insurance for All by 2047”.
    • Recommendations for Rationalisation:
      • The Standing Committee on Finance recommended rationalising the GST rate on insurance products to make them more affordable.
      • Suggestions include reducing GST rates for health insurance, especially for senior citizens, micro-insurance policies, and term policies.

    Insurance Penetration in India:

    • According to a Swiss Re Sigma report, insurance penetration in India’s life insurance sector reduced from 3.2% in 2021-22 to 3% in 2022-23, while the non-life insurance sector remained stagnant at 1%.
    • Overall insurance penetration reduced to 4% in 2022-23 from 4.2% in 2021-22.

     

    PYQ:

    [2018] Consider the following items:

    1. Cereal grains hulled

    2. Chicken eggs cooked

    3. Fish processed and canned

    4. Newspapers containing advertising material

    Which of the above items is/are exempted under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4