💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

GS Paper: GS3

  • In news: Channapatna Toys

    The COVID-19 pandemic has dealt a crippling blow to the Channapatna Toys industry.

    Must read:

    GI Tags in news for 2020 Prelims

    All time GI tags in news

    Channapatna Toys

    • Channapatna toys are a particular form of wooden toys (and dolls) that are manufactured in the town of Channapatna in the Ramanagara district of Karnataka.
    • This traditional craft is protected as a geographical indication (GI) under the World Trade Organization, administered by the state govt.
    • As a result of the popularity of these toys, Channapatna is known as Gombegala Ooru (toy-town) of Karnataka.
    • Traditionally, the work involved lacquering the wood of the Wrightia tinctoria tree, colloquially called Aale mara (ivory-wood).
    • Their manufacture goes back at least 200 years according to most accounts and it has been traced to the era of Hyder Ali and Tipu Sultan in the 18th century.
    • The toys are laced with vegetable dyes and colours devoid of chemicals and hence they are safe for children.

    Back2Basics: Geographical Indications in India

    • A Geographical Indication is used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Such a name conveys an assurance of quality and distinctiveness which is essentially attributable to its origin in that defined geographical locality.
    • This tag is valid for a period of 10 years following which it can be renewed.
    • Recently the Union Minister of Commerce and Industry has launched the logo and tagline for the Geographical Indications (GI) of India.
    • The first product to get a GI tag in India was the Darjeeling tea in 2004.
    • The Geographical Indications of Goods (Registration and Protection) Act, 1999 (GI Act) is a sui generis Act for the protection of GI in India.
    • India, as a member of the WTO enacted the Act to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights
    • GI protection is granted through the TRIPS Agreement.

  • Issue of GST compensation to states

    The article analyses the issue of GST compensation to states under GST regime for five years and how this has turned to be contentious issues after the economic disruption caused by Covid-19.

    The basis for compensation

    • Under Goods and Services Tax (GST) regime the Centre would make good the loss in the first five years if States faced revenue deficits after the GST’s introduction.
    • States sacrificed their constitutionally granted powers of taxation in the national interest.

    GST compensation cess

    • To pay the compensation to states, GST compensation cess was introduced.
    • When the GST compensation cess exceeded the amount that had to be paid to States, the Central government absorbed the surplus.
    •  Now, the economy has slowed down dramatically and the resources raised are insufficient.
    • The Centre is raising questions about whether it is legally accountable to pay compensation.
    • The constitutional framework that ushered in the GST does not provide an escape clause for ‘Acts of God’.

    Way forward

    • As stated by the Secretary of the GST Council in the tenth meeting, the central government could raise resources by other means for compensation and this could then be recouped by continuing the cess beyond five years.
    • Monetary measures are the monopoly of the central government.
    • Even borrowing is more efficient and less expensive if it is undertaken by the Central government.
    • As equal representatives of the citizens State governments expected the Centre to demonstrate empathy and provide them relief through the Consolidated Fund of India.

    Conclusion

    Central government should consider the legal provision in the GST regime and act in the spirit of cooperative federalism.

  • What is Compensation of GST?

    With Centre-State friction over pending compensation payments under the Goods and Services Tax (GST) taking a new turn in the 41st GST Council to meet, the strain on the finances of states is likely to continue in the near term.

    Try this question from CSP 2018:

    Q.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 exempt 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

    What is GST?

    • GST, being a consumption-based tax, would result in loss of revenue for manufacturing-heavy states.
    • GST launched in India on 1 July 2017 is a comprehensive indirect tax for the entire country.
    • It is charged at the time of supply and depends on the destination of consumption.
    • For instance, if a good is manufactured in state A but consumed in state B, then the revenue generated through GST collection is credited to the state of consumption (state B) and not to the state of production (state A).

    Compensation under GST regime

    • Due to the consumption-based nature of GST, manufacturing states like Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu feared a revenue loss.
    • Thus, GST Compensation Cess or GST Cess was introduced by the government to compensate for the possible revenue losses suffered by such manufacturing states.
    • However, under existing rules, this compensation cess will be levied only for the first 5 years of the GST regime – from July 1st, 2017 to July 1st, 2022.
    • Compensation cess is levied on five products considered to be ‘sin’ or luxury as mentioned in the GST (Compensation to States) Act, 2017 and includes items such as- Pan Masala, Tobacco, and Automobiles etc.

    Alternatives to prevent losses

    • The input tax credit can help a producer by partially reducing GST liability by only paying the difference between the tax already paid on the raw materials of a particular good and that on the final product.
    • In other words, the taxes paid on purchase (input tax) can be subtracted from the taxes paid on the final product (output tax) to reduce the final GST liability.

    Distributing GST compensation

    • The compensation cess payable to states is calculated based on the methodology specified in the GST (Compensation to States) Act, 2017.
    • The compensation fund so collected is released to the states every 2 months.
    • Any unused money from the compensation fund at the end of the transition period shall be distributed between the states and the centre as per any applicable formula.

    Significance of GST compensation

    • States no longer possess taxation rights after most taxes, barring those on petroleum, alcohol, and stamp duty were subsumed under GST.
    • GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of states’ total revenues.
    • Finances of over a dozen states are under severe strain, resulting in delays in salary payments and sharp cuts in capital expenditure outlay amid the pandemic-induced lockdowns and the need to spend on healthcare.

    Back2Basics:

    Goods and Services Tax

  • GIS-enabled Land Bank System

    A prototype of the National GIS-enabled Land Bank System was e-launched by Commerce and Industry Ministry for six States based on which land can be identified for setting up industries.

    Try to answer this question in short:

    Q.Discuss the benefits of digitizing land records in India.

    Land Bank System

    • The system has been developed by the Integration of Industrial Information System (IIS) with state GIS (Geographic Information System).
    • IIS portal is a GIS-enabled database of industrial clusters/areas across the states.
    • On the system, more than 3,300 industrial parks across 31 states/UTs covering about 4,75,000 hectares of land have also been mapped out on the system.
    • The information available on the system will include drainage, forest; raw material heat maps (horticulture, agricultural, mineral layers); multilayer of connectivity.
    • IIS has adopted a committed approach towards industrial upgrading, resource optimization, and sustainability.

    Various stakeholders

    • The initiative has been supported by the National e-Governance Division (NeGD), National Centre of Geo-Informatics (NCoG), Invest India, Bhaskaracharya Institute for Space Applications and Geo-Informatics (BISAG), and Ministry of Electronics and Informational Technology.

  • Species in news: Barn Owl

    With a thriving rat population playing havoc with its coconut yield, the UT of Lakshadweep hires barn owls for help.

    Try this PYQ:

    Q.The Red Data Books published by the International Union for Conservation of Nature and Natural Resources (IUCN) contains lists of:

    1. Endemic plant and animal species present in the biodiversity hotspots.
    2. Threatened plant and animal species.
    3. Protected sites for conservation of nature and natural resources in various countries.

    Select the correct answer using the codes given below:

    (a) 1 and 3

    (b) 2 only

    (c) 2 and 3

    (d) 3 only

    Barn Owl

    IUCN status: Least Concerned

    • The barn owl is the most widely distributed species of owl in the world and one of the most widespread of all species of birds.
    • It is found almost everywhere in the world except for the polar and desert regions, Asia north of the Himalayas, most of Indonesia, and some Pacific islands.

    What is Barn?

    • A barn is an agricultural building usually on farms and used for various purposes.
    • It refers to structures that house livestock, including cattle and horses, as well as equipment and fodder, and often grain.

  • Disintermediation from E-commerce

     E-commerce was expected to provide the level playing field. However, Indian e-commerce has been experiencing the duopoly and new entrant faces several difficulties.

    What is disintermediation

    • The emergence of the internet was seen as a tool for marketers to reach consumers directly.
    • The term disintermediation meant taking intermediaries out of the loop.
    •  The aim was efficiency.
    • It was hoped that without local stockists and distributors in between, retail demand could be fulfilled at lower cost.
    • After all, anyone could put up a website and woo traffic.

    What is the issue?

    • Today, the gains of online market addressal have converged into the hands of a few big winners in a winner-takes-all scenario.
    • Getting an app onto handsets often involves a toll paid to e-gatekeepers.
    • These apps created an entry barrier for the new entrants.
    • So far, single-brand apps have mostly failed, regardless of price baits.
    • After all, it is hard to beat the convenience of a single-touch window that lets shoppers load e-carts with all their needs.

    Conclusion

    E-com was once about snipping out distribution networks. With market access cornered by pioneers, now others want to get past these intermediaries. Only blockbuster apps can do it.

  • Boosting demand with wage hike

    The article discusses the threat posed to the Indian economy by the subdued demand following the return of the labourers to their urban jobs.

    Rural employment issue

    • About 30 million migrant workers rushed home to their villages during the pandemic.
    • About 60 per cent of out-migration from rural India is aspiration-led.
    • Income earned in urban jobs is 2.5 higher than earned in rural area.
    • Though rural economy has been recovering faster than the urban economy, this optimism could prove short-lived, as eventually the more long-lasting determinants of rural wages could prevail.

    What are the determinants of rural wages

    1) NREGA wages

    • The government has raised the rural employment guarantee programme (NREGA) wages and outlays.
    • Demand for the scheme is outpacing supply.
    • This demand-supply mismatch means that it may not be an effective driver of higher rural wages.

    2) Low construction activities

    • Many rural Indians, especially those without land, have become building labourers.
    • 70 per cent of construction is related to real estate and property developers are dependent on funding from struggling non-banking financial companies.
    • Until this type of lending restarts, construction may not normalise.
    • And that means rural wages may not rise quickly either.

    3) Rising debt level

    • The increase in borrowing and fall in inflation over the last few years has increased the “real” indebtedness of rural Indians.
    • This affected particularly the landowners who pay villagers to farm their land.
    • This is likely to hurt their ability to pay high wages.

    3 Reasons why wage outlook could be dimmer

    • As migrant labours start to return to their urban jobs, their wage outlook appears to be bleak for 3 reasons.
    • 1) As during demonetisation, workers could find jobs again, but at lower wages.
    • 2) There could be a second-round of pandemic-led labour market weakness, driven by job losses and falling wages from the first round.
    •  3) We find that both rural and urban wages are driven by economic growth, India’s post-pandemic medium-term growth falling by one percentage point to 5 per cent does not bode well.

    Way forward

    • Weak wages could keep demand subdued. To offset this policymakers have an important role to play.
    • 1) In particular, policymakers may have to ensure that capital is allocated efficiently.
    • After all, investment is the only way to increase the economy’s capacity to create well-paying jobs.
    • 2) Bringing back investment growth would also involve capital re-allocation.
    • This means taking it away from sectors that are not working and redeploying it in sectors that are.
    • Improving the Insolvency and Bankruptcy Code procedure is a key step here.
    • 3) Another important step is to improve the health of banks as they are the ones allocating capital by giving loans.
    •  Implementation of the 5-Rs — recognition, restructuring, resolution, recapitalisation and reforms — for the banking sector may be particularly useful here.

    Consider the question “After supply-side disruption is over, India’s growth may suffer from the subdued wage growth. Suggest the steps to avoid this from happening.”

    Conclusion

    Supply disruption caused by reverse migration won’t last long, but led by lower wages, demand could remain weak, requiring policy intervention.

  • Atal Tunnel at Rohtang

    The Atal Tunnel at Rohtang, near Manali, is almost complete in all respects and will be inaugurated very soon in September.

    Tap to read more about Himalayas at:

    https://www.civilsdaily.com/the-northern-and-northeastern-mountains-part-1/

    Atal Tunnel

    • The 9-km-long tunnel is constructed under the Pir Panjal range.
    • It has been named after former PM Atal Bihari Vajpayee and will be the world’s longest highway tunnel above the altitude of 10,000 feet (3000 metres).
    • It was scheduled to be completed by May 2020, in a revised estimate, but the Covid-19 pandemic pushed back the completion by a few months due to lockdown conditions.
    • Vehicles can travel at a maximum speed of 80 km per hour. Up to 1,500 trucks and 3,000 cars are expected to use it per day when the situation gets to normal.

    What is its strategic advantage?

    • Cutting through the Pir Panjal range, the tunnel will reduce the distance between Manali and Leh by 46 km.
    • The tunnel will provide almost all-weather connectivity to the troops stationed in Ladakh.

  • Making agricultural reforms successful

    The article analyses the issues with the reforms in the agricultural marketing policies.

    Recent reforms in agricultural marketing

    • The 3 recent reforms in agricultural marketing bring major changes in policy.
    • The removal of restrictions under the Essential Commodities Act (ECA) should help attract private investment in agriculture.
    • The two new ordinances are expected to enable inter-State trade and promote contract farming, thereby providing a large number of options to farmers.

    Concerns that need to be addressed

    1) Policy credibility problem

    • The first problem is ‘time-inconsistency’ problem or the policy credibility problem.
    • This situation arises when a decision maker’s preferences change over time in such a way that the preferences are inconsistent at different points in time.
    • Because the policy signals are not very clear in the last few years as relates to agricultural marketing, as we will see below.
    • This clarity of clear signal is reflected in rollout of multiple schemes: e-NAM, PM-AASHA, PM-KISAN.
    • In 2016, the electronic national agricultural market (e-NAM) was launched with a lot of fanfare.
    • States needed to amend their respective Agricultural Produce Market Committee (APMC) Acts.
    • Several States could not or did not carry out these amendments and the e-NAM proved to be far less effective than desired.
    • As a result, the government reverted back to public price support by launching an ambitious programme, PM-AASHA, in September 2018.
    • The programme was confined to pulses and oilseeds to limit the fiscal costs.
    • However, the initial budgetary outlay did not match the level of ambition of the programme.
    • In addition to the PM-AASHA programme, two Model Acts were formulated by the Central government in 2017 and 2018 to promote agricultural marketing and contract farming in States.
    • States were required to legislate these Model Acts.
    • However, progress has been tardy and many States have not adopted the Model Acts.
    • This uninspiring performance of PM-AASHA necessitated a more radical and direct approach.
    • Thus evolved the PM-KISAN, a direct cash transfer programme, in the interim Budget of 2019-2020 (February 2019).
    • This programme involved a fixed payment of ₹6,000 per annum to each farm household with a budgetary outlay of ₹75,000 crore.
    • The frequent flip-flops in farm policy — from a market-based e-NAM to a public funded PM-AASHA and now back to market-based measures — may not inspire much confidence in the minds of private investors about the continuance of the present policies.

    2) Centre-State and State-State relations

    • Recent Ordinances were passed by the Central Government using the constitutional provisions but the implementation of the same vests with the States.
    • Also, inter-State trade involves movement of goods across the State boundaries.
    • Thus, coordination between the Central and the State governments, and also among various States becomes crucial.
    • Also, the States must have faced several problems in legislating and implementing the earlier Model Acts.
    • Thus, the Centre must engage with the States about these constraints in order to iron out the potential problems in the implementation of the ordinances.

    3) Multiple market failures and the resultant inter-linkage of rural markets

    • Absence or failure of credit and insurance markets may lead a farmer to depend upon the local input dealer.
    • This, in turn, may tie him to these intermediaries and constrain his choice of output markets.
    • Similarly, the widespread restrictions on land leasing in many States lead to an inefficient scale of production.
    • Thus, reforms in the output market alone are not sufficient.
    • Reforms in output must be supplemented and complemented with the liberalisation of the lease market and better access to credit and insurance markets.

    Consider the question “What are the reform measures taken by the government to deal with the issues in the agricultural marketing by farmers? What are the concerns with such measures?”

    Conclusion

    In conclusion, consistency in policy, collaborative approach and complementary reforms are necessary for the success of the recent agricultural market reforms.

    Back2Basics: Agricultural reform

    Read in detail about the 3 reforms form here-

    Agri reforms and way forward

  • Space industry and challenges

    The article analyses opportunities and challenges the outer space technology offers to us.

    Emerging trends in space industry

    • The price for reaching low Earth orbit has declined by a factor of 20 in a decade.
    • It enhances human space travel possibilities by leveraging new commercial capabilities.
    • According to a Bank of America Report, the $350 billion space market today will touch $2.7 trillion by 2050.
    • Starlink, the constellation being constructed by SpaceX to provide global Internet access, plans more than 10,000 mass-produced small satellites in low Earth orbit. 
    •  In a decade, 80,000 such satellites could be in space compared to less than 3,000 at present.
    • Companies such as Planet, Spire Global and Iceye are using orbital vantage points to collect and analyse data to deliver fresh insights in weather forecasting, global logistics, crop harvesting and disaster response.
    • Space could prove attractive for high-tech manufacturing too.
    • In short, an exciting new platform is opening up for entrepreneurs.

    3 Challenges

    1) Governance of outer space

    • Framework for governance of outer space as it becomes democratised, commercialised and crowded is becoming obsolescent.
    • The Outer Space Treaty of 1967 enshrines the idea that space should be “the province of all mankind” and “not subject to national appropriation by claims of sovereignty”.
    • The Rescue Agreement, Space Liability Convention, and the Space Registration Convention expanded provisions of the Outer Space Treaty.
    • The Moon Treaty of 1979 was not ratified by major space-faring nations.
    • Space law does not have a dispute settlement mechanism, is silent on collisions and debris, and offers insufficient guidance on interference with others’ space assets.
    • These gaps heighten the potential for conflict in an era of congested orbits and breakneck technological change.

    2) Acknowledging role of non-state entities

    • The legal framework related to outre space is state-centric, placing responsibility on states alone.
    • However, non-state entities are now in the fray for commercial space exploration and utilisation.
    • Some states are providing frameworks for resource recovery through private enterprises.
    • Some scholars and governments view this as against the principle of national non-appropriation, violating the spirit if not the letter of the existing space law.
    • The lack of alignment of domestic and international normative frameworks risks a damaging free-for-all competition for celestial resources involving actors outside the space framework.

    3) The arms race in outer space

    • The space arms race is difficult to curb, especially since almost all space technologies have military applications.
    • For example, satellite constellations are commercial but governments could acquire their data to monitor military movements.
    • Investment in technologies that can disrupt or destroy space-based capabilities is under way.
    • Despite concerns about military activity in outer space for long, not much progress has been made in addressing them.
    • The UN General Assembly passes a resolution on Prevention of an Arms Race in Outer Space since 1982.
    • The current geopolitical situation does not hold hope for addressing concerns of a space arms race.

    Need for space legislation in India

    • India has invested enormous resources in its space programme through the Indian Space Research Organisation.
    • More importantly, our space assets are crucial for India’s development.
    • The proposed involvement of private players and the creation of an autonomous body IN-SPACe for permitting and regulating activities of the private sector are welcome efforts.
    • However, the space environment that India faces requires us to go beyond meeting technical milestones.
    • We need a space legislation enabling coherence across technical, legal, commercial, diplomatic and defence goals.

    Consider the question “Outer space technology is expanding its horizon day by day. However, there are certain challenges the expansion of the space technology faces. What are these challenges and suggest ways to deal with such challenges.”

    Conclusion

    Our space vision also needs to address global governance, regulatory and arms control issues. As space opens up our space vision needs broadening too.