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GS Paper: GS3

  • What is Vertical Fiscal Imbalance? 

    Why in the News?

    The financial relationship between the Union and State governments in India is imbalanced, similar to other nations with a federal constitutional structure.

    What is Vertical Fiscal Imbalance (VFI)?

    Vertical fiscal imbalance (VFI) refers to the mismatch between the revenue-raising powers and expenditure responsibilities of different levels of government (between the Center and state) within a country.

    Why should Vertical Fiscal Imbalance (VFI) be reduced?

    • Decentralization of Expenditure: States are responsible for 61% of the revenue expenditure, focusing on crucial sectors like health, education, and infrastructure, but they generate only 38% of the revenue.
      • This imbalance creates a dependency on central transfers, limiting the States’ fiscal autonomy.
    • Need Efficiency in Spending: Reducing VFI would provide states with more resources, allowing them to respond better to local needs and improve governance efficiency.
    • Need to strengthen Fiscal Federalism: A reduction in VFI promotes a healthier system of cooperative federalism, ensuring that states have adequate resources to carry out their constitutional responsibilities and meet the demands of their populations.
    • Need Preparedness for crises: VFI becomes more pronounced during crises (e.g., COVID-19), leading to fiscal stress for States. A more balanced fiscal arrangement ensures better crisis management at the sub-national level.

    Present Scenario of VFI and Tax Devolution in India

    • VFI Extent: The 15th Finance Commission noted that despite States‘ heavy spending responsibilities, their revenue-raising powers are limited.
    • Tax Devolution Rates: The 14th and 15th FC recommended devolving 42% and 41%, however, estimates suggest that an average share of 48.94% was necessary between 2015-2023 to eliminate the VFI.
    • Exclusion of Cesses and Surcharges: The exclusion of cesses and surcharges from the divisible pool of taxes shortens the net proceeds. States argue this limits the resources available to them to meet their expenditure responsibilities.
    • Fiscal Responsibility: Despite the constraints, states have largely adhered to borrowing limits under fiscal responsibility legislation. However, states still struggle to meet their expenditure responsibilities, highlighting the need for greater financial support from the Centre.
    Note: The Sixteenth Finance Commission was constituted on December 31 2023 with Dr. Arvind Panagariya as the Chairman. The 16th FC has been requested to make its report available by the 31st day of October 2025 covering 5 years commencing on the 1st day of April, 2026.

     

    What should be the role objective of the 16th FC?

    • Increase Tax Devolution: Many States demand that tax devolution from the Union’s net proceeds should be raised to 50%. The 16th Finance Commission must consider raising the devolution rate to around 49% to address the VFI and ensure sufficient untied funds for States.
    • Address Cesses and Surcharges: The 16th Finance Commission should evaluate the exclusion of cesses and surcharges from the divisible pool.
    • Empower States with Fiscal Autonomy: The Commission’s objective should be to empower States with greater fiscal autonomy by ensuring adequate resources for them to perform their constitutional duties without undue dependence on the Centre.
    • Support Local Priorities: The Commission should aim to provide States with untied resources, enabling them to cater to jurisdictional needs and set priorities that align with their specific developmental challenges, ensuring a more responsive governance system.

  • Bandipur Tiger Reserve (BTR)

    Why in the News?

    An elephant was rescued from a rail barricade in the Maddur range of Bandipur Tiger Reserve.

    About the Bandipur Tiger Reserve (BTR):

    Details
    Location Mysore and Chamarajanagar districts, Karnataka; at the tri-junction of Karnataka, Tamil Nadu, and Kerala.
    Part of Nilgiri Biosphere Reserve, a UNESCO World Heritage Site.
    Geography “Ecological confluence” of the Western and Eastern Ghats (along with Mudumalai and Wayanad)
    History Established as Venugopala Wildlife Park in 1931; expanded as Bandipur Tiger Reserve under Project Tiger in 1973.
    Surrounding Reserves Bordered by Nagarahole Tiger Reserve (NW), Mudumalai Tiger Reserve (S), and Wayanad Wildlife Sanctuary (SW).
    Rivers Surrounded by River Kabini (North) and River Moyar (South).
    Climate Tropical climate with distinct wet and dry seasons.
    Flora Dry deciduous to tropical mixed deciduous forests; includes rosewood, sandalwood, Indian laurel, and bamboo species.
    Fauna Home to the largest population of wild Asian elephants in South Asia; also includes Bengal tiger, gaur, sloth bear, dhole, and others.

     

    PYQ:

    [2017] From the ecological point of view, which one of the following assumes importance in being a good link between the Eastern Ghats and the Western Ghats?

    (a) Sathyamangalam Tiger Reserve

    (b) Nallamala Forest

    (c) Nagarhole National Park

    (d) Seshachalam Biosphere Reserve

  • [pib] HIM- DRONE-A-THON-2 & HIMTECH-2024

    Why in the News?

    The Indian Army has announced two significant events, HIM-DRONE-A-THON 2 and HIMTECH-2024, aimed at advancing military technologies for operations in high-altitude areas.

    About HIM-DRONE-A-THON 2 

    • HIM-DRONE-A-THON 2 is scheduled to take place at Wari La, near Leh on 17-18 September 2024.
    • This event serves as a platform for the Indian Drone Industry to demonstrate drone solutions tailored for high-altitude areas, where the Indian Army frequently operates.
    • The event will be conducted under actual terrain and environmental conditions at altitudes ranging from 4,000 to 5,000 meters to test the drones’ performance in realistic scenarios.
    • Indigenous drone manufacturers are invited to participate, demonstrating various drone types, including:
      • Surveillance drones
      • Loitering munitions
      • Logistics drones
      • Swarm drones
      • Drones with specialized roles and payloads, such as Electronic Warfare, Synthetic Aperture Radar, Communication Intelligence, and Electronic Intelligence.

    HIMTECH-2024: Advancing High-Altitude Technologies

    • HIMTECH-2024 will follow HIM-DRONE-A-THON 2.
    • It is conceptualized to discuss, demonstrate, and explore new opportunities for the development and integration of technologies for high-altitude military operations.
    • It has been organized in collaboration with FICCI (Federation of Indian Chambers of Commerce & Industry).
    • It will highlight the latest technologies and systems developed to meet the operational requirements along India’s Northern Borders.

  • Project Strawberry by OpenAI

    Why in the News?

    OpenAI has planned to release its most powerful AI model likely as part of ChatGPT-5. Initially called Project Q* (Q-star), it is now codenamed Project Strawberry.

    What is Project Strawberry?

    • Nearly six months ago, OpenAI’s secretive Project Q* (Q-Star) gained attention for its innovative approach to AI training.
    • OpenAI is now working on a new reasoning technology under the code name “Strawberry” believed to be the new name for Project Q*.
    • Strawberry aims to enable AI models to plan ahead, autonomously search the internet, and conduct deep research.

    What are Large Language Models (LLMs)?

    • LLMs are advanced artificial intelligence (AI) systems designed to understand, generate, and process human language.
    • They are built using deep learning techniques, particularly neural networks, and are trained on vast amounts of text data.

    Difference from Existing AI Models

    • Existing Large Language Models (LLMs) can summarize texts and compose prose but struggle with common sense problems and multi-step logic tasks.
    • Current LLMs cannot plan ahead effectively without external frameworks.
    • Strawberry models are expected to enhance AI reasoning, allowing for planning and complex problem-solving.
    • These models could enable AI to perform tasks that require a series of actions over an extended time, potentially revolutionizing AI’s capabilities.

    Potential Applications of Strawberry Models

    • Advanced AI models could conduct experiments, analyze data, and suggest new hypotheses, leading to breakthroughs in sciences.
    • In medical research, AI could assist in drug discovery, genetics research, and personalized medicine analysis.
    • AI could solve complex mathematical problems, assist in engineering calculations, and participate in theoretical research.
    • AI could contribute to writing, creating art and music, generating videos, and designing video games.

    PYQ:

    [2020] With the present state of development, Artificial Intelligence can effectively do which of the following?

    1. Bring down electricity consumption in industrial units.
    2. Create meaningful short stories and songs.
    3. Disease diagnosis.
    4. Text-to-Speech Conversion.
    5. Wireless transmission of electrical energy.

    Select the correct answer using the code given below:

    (a) 1, 2, 3 and 5 only
    (b) 1, 3 and 4 only
    (c) 2, 4 and 5 only
    (d) 1, 2, 3, 4 and 5

  • Did Corporate Tax cuts increase Wages?

    Why in the News?

    Before the pandemic, the U.S. and India reduced corporate taxes to boost growth but we now we can evaluate their effects.

    Case Study on the Effects of Tax Cuts in the U.S.

    The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, significantly reduced the corporate tax rate from 35% to 21%. A recent analysis by economists Gabriel Chodorow-Reich, Owen Zidar, and Eric Zwick highlights several key findings:

    • Investment Increase: The TCJA led to an estimated increase in investment of approximately 8% to 14%.
    • GDP Growth: The long-term increase in GDP is projected to be modest, around 0.9%, which is substantially lower than initial expectations.
    • Wage Impact: The increase in annual wages due to the tax cuts was less than $1,000 per worker, contrasting sharply with earlier claims of increases between $4,000 and $9,000.
    • Tax Revenue Decline: The TCJA is expected to result in a long-term reduction in tax revenue of nearly 41%, raising concerns about the fiscal health of the U.S. economy.

    Tax Cuts in India

    In September 2019, India also implemented corporate tax cuts, reducing the rate for existing companies from 30% to 22% and for new companies from 25% to 15%.  The primary reason for this move was to stimulate economic growth and attract investment, particularly in the manufacturing sector.

    Impact of the Tax cuts:

    • Revenue Loss: The tax cuts resulted in a revenue loss of approximately ₹1 lakh crore in 2020-21.
    • Gig workers (insecure forms of work): Although unemployment has decreased since the pandemic, much of the new employment is in insecure forms of work.
    • Decline in Regular Employment: According to the Periodic Labour Force Survey (PLFS) in India, the share of regular wage employment fell from 22.8% in 2017-18 to 20.9% in 2022-23.
    • Tax Burden Shift: There has been a notable shift in the tax burden from corporate taxes to individual income taxes. The share of corporate taxes in gross tax revenues fell from about 32% in 2017-18 to 26.5% in 2024-25.

    What must be the next step? ( Way forward)

    • Focus on Future Investment: Policymakers should consider implementing high taxes on existing profits while providing incentives for future investments to stimulate economic activity.
    • Addressing Income Inequality: Tax policies should be designed to ensure that the benefits of tax cuts do not disproportionately favour wealthier individuals or corporations at the expense of wage earners.
    • Evaluating Economic Conditions: Need to evaluate the tax cuts to ensure they are not merely providing short-term benefits without addressing long-term growth and fiscal stability.

    Mains PYQ:

    Q  Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017. (UPSC IAS/2019)

  • Anti-Naxal Operation in Dantewada, Chhattisgarh

    Why in the News?

    • In a significant anti-Naxal operation, nine Maoists were killed by security forces in the forests along the border of Chhattisgarh’s Dantewada.
      • This operation was part of ongoing efforts to eliminate Naxalite influence in the region.

    Anti-Naxal Operation in Dantewada

    • Dantewada, a district in the Bastar region of Chhattisgarh, India, is known as a hotbed of Naxal (Maoist) insurgency. 
    • The region has seen numerous anti-Naxal operations over the years due to its dense forests, rugged terrain, and the presence of significant Naxalite (Maoist) cadres.

    Important security operations against Naxalism:

    Details
    Operation Greyhounds 1989 – Ongoing: A specialized anti-Naxal force created to combat Naxal insurgency in Andhra Pradesh and Telangana.
    Operation Green Hunt 2009 – Ongoing: To flush out Naxalite insurgents in the “Red Corridor ” from their strongholds.
    Operation Thunderstorm 2010: To target Naxal cadres in the dense forest regions of Lalgarh, West Bengal.
    Operation Octopus 2014: To clear Maoist influence from the Sukma district of Chhattisgarh.
    Operation All Out 2015 – Ongoing: To launch coordinated offensive operations against Naxalites in Jharkhand and Bihar.
    Operation Samadhan 2017 – Ongoing: A comprehensive strategy to combat LWE by addressing both security and developmental issues.
    Operation Prahar 2017 – Ongoing: To eliminate top Maoist leaders and dismantle support networks in the Bastar region of Chhattisgarh.
    Operation Monsoon 2018: To target Maoist groups during the monsoon season when their activities are restricted.

     

    PYQ:

    [2022] Naxalism is a social, economic and developmental issue manifesting as a violent internal security threat. In this context, discuss the emerging issues and suggest a multi-layered strategy to tackle the menace of Naxalism.

  • [pib] SCOMET List

    Why in the News?

    The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce & Industry, has released the updated SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) list for the year 2024.

    What is the SCOMET List?

    Details
    Purpose To regulate the export of dual-use items that can be used for both civilian and military applications, particularly those that could contribute to the development of weapons of mass destruction (WMDs) and their delivery systems.
    Regulatory Authority Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry, Government of India.
    Notification Notified by DGFT under Appendix 3 to Schedule 2 of the ITC (HS) Classification of Export and Import Items.
    Legal Framework Governed by Chapter IVA of the Foreign Trade (Development & Regulation) Act, 1992, as amended in 2010.

    This chapter provides the legal basis for export control of dual-use items and outlines penalties for non-compliance.
    Policy and Procedures Outlined in Chapter 10 of the Foreign Trade Policy (FTP) and the Handbook of Procedures (HBP) 2023.

    These documents provide the detailed procedure for licensing, application, and compliance for exporting SCOMET items.
    Categories The SCOMET List includes multiple categories:
    1. Category 0: Nuclear materials and nuclear-related dual-use items.
    2. Category 1: Toxic chemical agents and precursors.
    3. Category 2: Materials and materials processing equipment.
    4. Category 3: Electronics.
    5. Category 4: Computers.
    6. Category 5: Telecommunications and information security.
    7. Category 6: Sensors and lasers.
    8. Category 7: Navigation and avionics.
    9. Category 8: Marine.
    10. Category 9: Aerospace and propulsion.
    New Licensing Authority for Category 6 Department of Defence Production (DDP), Ministry of Defence is the new licensing authority for the export of items under Category 6 (Sensors and Lasers).
    Export Licensing Exporters must obtain a specific license from DGFT (or DDP for Category 6) to export SCOMET items.

    The licensing process includes a comprehensive review to ensure that exports do not contribute to the proliferation of WMDs or unauthorized military use.

     

  • [pib] India Semiconductor Mission (ISM)

    Why in the News?

    The Union Cabinet has approved the proposal by Kaynes Semicon Pvt Ltd to establish a semiconductor unit in Sanand, Gujarat. This is the 5th semiconductor unit to be approved under the India Semiconductor Mission (ISM). 

    About India’s Semiconductor Mission (ISM):

    Details
    Launch Year 2021
    Financial Outlay ₹76,000 crore
    Backing by  Ministry of Electronics and IT (MeitY)
    Objective Develop a sustainable semiconductor and display ecosystem in India.
    Primary Goal Provide financial support to companies investing in semiconductor and display manufacturing and design ecosystem.
    Leadership Envisioned to be led by global experts in the Semiconductor and Display industry.
    Components
    • Scheme for Semiconductor Fabs: Fiscal support to set up semiconductor wafer fabrication facilities.
    • Scheme for Display Fabs: Fiscal support for setting up TFT LCD/AMOLED display fabrication facilities.
    • Scheme for Compound Semiconductors / Silicon Photonics / Sensors Fab and ATMP/OSAT: 30% fiscal support for setting up compound semiconductors, silicon photonics, sensors fabs, and ATMP/OSAT facilities.
    • Design Linked Incentive (DLI) Scheme: Financial incentives and design infrastructure support for semiconductor design for ICs, chipsets, SoCs, systems & IP cores.
    Vision To develop India into a global hub for semiconductor and display manufacturing and design.

  • What is Digital Agriculture Mission?

    Why in the News?

    The Union Cabinet has approved the “Digital Agriculture Mission” with a budget of ₹2,817 Crore, including ₹1,940 Crore as the central share.

    About Digital Agriculture Mission

    Category Details
    Historical Context Originally planned for the financial year 2021-22 but delayed due to the Covid-19 pandemic.

    Announced in the Union Budgets of 2023-24 and 2024-25.
    Funding Breakdown Total outlay: Rs 2,817 crore

    • Rs 1,940 crore from the Centre
    • Remaining amount from states and Union Territories (UTs)
    Objective To create Digital Public Infrastructure (DPI) in the agriculture sector, similar to other e-governance initiatives like Aadhaar, DigiLocker, eSign, UPI, and electronic health records.
    Major Components of DPI 1. AgriStack:
    – A comprehensive digital platform integrating various agricultural services.
    – Facilitates access to information, services, and benefits related to farming and agricultural practices.
    – Centralizes agricultural data to improve accessibility and efficiency.
    2. Krishi Decision Support System (DSS):
    – Provides data-driven insights and recommendations for farmers.
    – Assists in decision-making related to crop management, pest control, and resource optimization based on real-time data.
    – Utilizes advanced analytics to enhance productivity and mitigate risks.
    3. Soil Profile Maps:
    – Detailed digital maps on a 1:10,000 scale covering approximately 142 million hectares.
    – Provides comprehensive information about soil characteristics and health.
    – Supports precision agriculture by offering targeted soil data for optimal crop planning.
    Additional Component Digital General Crop Estimation Survey (DGCES):
    – A tech-based system to provide accurate estimates of agricultural production.
    – Aims to offer reliable data for policy decisions, agricultural planning, and resource allocation.
    Impact on Farmers The mission will enable farmers to access a range of digital services, improve decision-making through data analysis, enhance productivity with detailed soil information, and provide accurate crop estimations to better manage agricultural practices.
    Timeline Rolled out across the country over the next two years (until 2025-26).

     

    PYQ:

    [2020] In India, the term “Public Key Infrastructure” is used in the context of:

    (a) Digital security infrastructure

    (b) Food security infrastructure

    (c) Health care and education infrastructure

    (d) Telecommunication and transportation infrastructure
  • [3rd September 2024] The Hindu Op-ed: The Disaster Management (Amendment) Bill is knotty

    [3rd September 2024] The Hindu Op-ed: The Disaster Management (Amendment) Bill is knotty

    PYQ Relevance:

    Q Discuss the recent measures initiated in disaster management by the Government of India departing from the earlier reactive approach. (UPSC IAS/2020)

    Q Describe various measures taken in India for Disaster Risk Reduction (DRR) before and after signing ‘Sendai Framework for DRR (2015-2030)’. How is this framework different from ‘Hyogo Framework for Action, 2005’? (UPSC IAS/2018)

    Q How important are vulnerability and risk assessment for pre-disaster management? As an administrator, what are key areas that you would focus on in a Disaster Management System? (UPSC IAS/2013)

    Q Disaster preparedness is the first step in any disaster management process. Explain how hazard zonation mapping will help disaster mitigation in the case of landslides. (UPSC IAS/2019)

    Mentor comment: On August 1, 2024, the Indian government introduced the Disaster Management (Amendment) Bill in the Lok Sabha, aiming to amend the Disaster Management Act of 2005. The Bill centralized disaster management further by granting statutory status to existing bodies like the National Crisis Management Committee and establishing an Urban Disaster Management Authority for major cities. While it seeks to empower the National and State Disaster Management Authorities to prepare disaster plans and create a national disaster database, critics argue it complicates the disaster response framework and could delay actions during emergencies, undermining the Act’s original intent.

    _

    Let’s learn!

    Why in the News?

    The Disaster Management (Amendment) Bill 2024 introduced recently complicates the disaster response framework and could delay actions during emergencies, undermining the Act’s original intent

    What are the key highlights/features of this Bill?

    • Statutory Recognition for Existing Bodies: Grants statutory status to pre-existing organizations such as the National Crisis Management Committee (NCMC) and the High-Level Committee (HLC), enhancing their roles in managing major disasters.
    • Regulatory Powers: Empowers the NDMA to make regulations under the Act with prior approval from the central government, allowing for greater flexibility in disaster management.
    • Disaster Database: Mandates the creation of a disaster database at both national and state levels, which will include information on disaster assessments, fund allocations, expenditures, preparedness and mitigation plans, and risk registers.
    • Empowerment of National and State Authorities: The Bill empowers the National Disaster Management Authority (NDMA) and State Disaster Management Authorities (SDMAs) to directly prepare disaster management plans, replacing the previous role of the National and State Executive Committees.
      • It also establishes UDMAs (Urban Disaster Management Authorities) for state capitals and large cities with municipal corporations, excluding Delhi and Chandigarh.
    • State Disaster Response Force (SDRF): Provides for the constitution of SDRFs by state governments, which will be responsible for disaster response at the state level. The Bill allows states to define the functions and terms of service for these forces.
    • Focus on Disaster Risk Reduction (DRR): Expands the definition of disaster management to include disaster risk reduction, emphasizing proactive measures to reduce vulnerability and enhance preparedness.
    • Penalties for Non-compliance: Introduces provisions allowing the central and state governments to direct individuals to take necessary actions or refrain from actions to mitigate disaster impacts, with penalties for non-compliance capped at ₹10,000.

    Critics around the Disaster Management (Amendment) Bill, 2024:

    • Centralization of Decision-Making: The Bill dilutes the NDRF’s purpose by removing specific uses for the fund, which has historically led to delays in aid distribution during severe disasters, as seen in the delayed response to Tamil Nadu’s needs compared to Karnataka’s.
      • This centralization may hinder prompt action in urgent situations.
    • Restricted Definition of ‘Disaster’: The Bill does not classify ‘heatwaves’ as a notified disaster, despite their increasing frequency and severity in India. This restrictive approach limits the scope for addressing emerging climate-induced challenges effectively.

    Conclusion:

    There is a need to re-visit the Centre’s efforts in addressing the issue of financial preparedness when it comes to the management of and response to disasters. The decision should avoid the single most event of the Wayanad Disaster and needs to have a broader view. After all, a blame game will only move away from realizing the true spirit of cooperative federalism.

    https://www.thehindu.com/opinion/op-ed/the-disaster-management-amendment-bill-is-knotty/article68597815.ece