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Coronavirus – Economic Issues

Building a resilient economy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TRIPS waiver

Mains level : Paper 3- Sustaining recovery

Context

To revive and sustain growth, action is needed both at the international and national levels.

Hopes of V-shaped recovery of Indian economy

  • The National Statistical Office (NSO) had recently estimated that India’s economic growth has surged to 20.1% in the April-June quarter.
  • In its recently launched Trade and Development Report 2021, UNCTAD has estimated global growth to hit 5.3% in 2021 and growth in India to hit 7.2%.
  • According to the report, India showed strong quarterly growth of 1.9% in the first quarter of 2021, on the back of the momentum of the second half of 2020 and supported by government spending in goods and services.
  • Given the inherent fragilities, India’s growth in 2021 as a whole is estimated at 7.2%, which is one of the fastest compared to most countries in the analysis.
  • But it is still not sufficient to regain the pre-COVID-19 income level.
  • However, going forward, the economy is likely to experience a deceleration of growth to 6.7% growth in 2022.

Ways to sustain growth

1) Efforts at the International level

  • To revive and sustain growth, action is needed both at the international and national levels.
  • TRIPS waiver: The report strongly supports India’s proposed temporary suspension of the World Trade Organization TRIPS waiver.
  • Waiver is considered as a necessary step to enable the local manufacture of vaccines in developing countries

2) Steps to be taken at the national level

  • Resilience: At the national level, COVID-19 has reinforced the idea that resilience is a public good and responsibility of the state.
  • It has to be delivered through a robust public sector with the resources to make the necessary investments, provide the complementary services and coordinate the multiple activities that building resilience involves.
  • Mobilising financial resources: We need a financial system that accords a more significant role to public banks, breaks up and guards against the emergence of megabanks, and exercises stronger regulatory oversight is more likely to deliver a healthier investment climate.
  • Minimum wage:  Wages are a critical source of demand and their growth can stimulate productivity and underpin a strong social contract.
  • Minimum wages and related labour legislation are needed for appropriate protection against abusive practices.
  • Policies for informal sector: Policies targeting informality are of particular importance, especially for a country like India with a large informal economy.

Conclusion

It is important to build a healthy, diversified economy. For this, a strong industrial policy focusing on building digital capacities is needed. A resilient economy goes beyond offering a residual category of safety nets designed to stop those left behind from falling further.

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Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

E-Shram

Note4Students

From UPSC perspective, the following things are important :

Prelims level : E-Shram Portal

Mains level : National database for workers: Prospects and challenges

The E-Shram portal has come into existence more than a decade after the passage of the Unorganized Workers’ Social Security Act in 2008.

E-Shram

  • On August 26, 2021, the Ministry of Labour and Employment (MOLE) launched the E-Shram, the web portal for creating a National Database of Unorganized Workers (NDUW), which will be seeded with Aadhaar.
  • It seeks to register an estimated 398-400 million unorganized workers and to issue an E-Shram card.

Better late than never move

  • It has come about even after repeated nudging by the Supreme Court of India.
  • It is the result of state apathy.
  • Had the Central and the State governments begun these legally mandated processes on time, much of the distress of lakhs of vulnerable workers would have been avoided.
  • In fact, the political class owe an ‘apology’ to informal workers.

Issues with E-Shram

(A) Time constraints

  • Long process: Given the gigantic nature of registering each worker, it will be a long-drawn process.
  • No gestation period: The Government has not mentioned a gestation period to assess its strategy and efficiency.
  • No hasty process: Employers are or required their workers to register even.While the Government can appeal to them, any penal measure will hurt the ease of doing business.

(B) Pandemic hides

  • Considering the estimated 380 million workers as the universe of registration — debatable as the novel coronavirus pandemic has pushed lakhs of workers into informality.

(C) Data security

  • Privacy: One of the vital concerns of e-portals is data security, including its potential abuse especially when it is a mega-sized database.
  • No national framework yet: There are also media reports pointing out the absence of a national architecture relating to data security.
  • Local server issues: It has been reported that in some States such as Maharashtra, the server was down for a few days.

(D) Structural issue

  • Aadhaar seeding: Many workers will not have an Aadhaar-seeded mobile or even a smartphone. Aadhaar-seeding is a controversial issue with political overtones, especially in the North-eastern regions.
  • Eligibility: There are several issues concerning the eligibility of persons to register as well as the definitional issues.
  • Exclusion: By excluding workers covered by EPF and ESI, lakhs of contract and fixed-term contract workers will be excluded from the universe of UW. Hazardous establishments employing even a single worker will have to be covered under the ESI, which means these workers also will be excluded.
  • No benefits for the aged: The NDUW excludes millions of workers aged over 59 from its ambit, which constitutes age discrimination.

(D) Complex identities of workers

  • Migration: Many are circular migrant workers and they quickly, even unpredictably, move from one trade to another.
  • Mixed work: Many others perform formal and informal work as some during non-office hours may belong to the gig economy, for example as an Uber taxi or a Swiggy employee. They straddle formal and informal sectors.
  • Gig workers: Even though MOLE has included gig workers in this process, it is legally unclear whether the gig/platform worker can be classified first as a worker at all.

(E) Other impediments

  • Dependence on States: The central government will have to depend on the State governments for this project to be successful.
  • Lack of coordination: In many States, the social dialogue with the stakeholders especially is rather weak or non-existent. The success of the project depends on the involvement of a variety of stakeholders apart from trade unions.
  • Corruption: There is also the concern of corruption as middle-service agencies such as Internet providers might charge exorbitant charges to register and print the E-Shram cards.

Benefits: No immediate carrot

  • Workers stand to gain by registration in the medium to long run.
  • But the instant benefit of accident insurance upto ₹0.2 million to registered workers is surely not an attractive carrot.
  • The main point of attraction is the benefits they stand to gain during normal and crisis-ridden periods such as the novel coronavirus pandemic now which the Government needs to disseminate properly.

Way forward

  • E-Shram is a vital system to provide hitherto invisible workers much-needed visibility.
  • It will provide the Labour Market Citizenship Document to them.
  • The govt should go one step further for triple linkage for efficient and leakage-less delivery of all kinds of benefits and voices to workers/citizens: One-Nation-One-Ration Card (ONOR), E-Shram Card (especially bank account seeded) and the Election Commission Card.
  • Last but not least, registrations cannot be a source of exclusion of a person from receiving social assistance and benefits.

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Insolvency and Bankruptcy Code

Government sets up ‘bad bank’ to clear the NPA mess

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Bad Banks

Mains level : Asset reconstruction initiaitives by the govt

Paving the way for a major clean-up of bad loans in the banking system, the Union Cabinet has cleared a ₹30,600-crore guarantee programme for securities to be issued by the newly incorporated ‘bad bank’ for taking over and resolving non-performing assets (NPAs) amounting to ₹2 lakh crore.

What is a Bad Bank?

  • A bad bank conveys the impression that it will function as a bank but has bad assets to start with.
  • Technically, it is an asset reconstruction company (ARC) or an asset management company that takes over the bad loans of commercial banks, manages them and finally recovers the money over a period of time.
  • Such a bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
  • The takeover of bad loans is normally below the book value of the loan and the bad bank tries to recover as much as possible subsequently.

Bad Banks to be established

  • The NARCL-IDRCL structure is the new bad bank.
  • The National Asset Reconstruction Company Limited (NARCL) has already been incorporated under the Companies Act.
  • It will acquire stressed assets worth about Rs 2 lakh crore from various commercial banks in different phases.
  • Another entity — India Debt Resolution Company Ltd (IDRCL), which has also been set up — will then try to sell the stressed assets in the market.

How will the NARCL-IDRCL work?

  • The NARCL will first purchase bad loans from banks.
  • It will pay 15% of the agreed price in cash and the remaining 85% will be in the form of “Security Receipts”.
  • When the assets are sold, with the help of IDRCL, , the commercial banks will be paid back the rest.
  • If the bad bank is unable to sell the bad loan, or has to sell it at a loss, then the government guarantee will be invoked.
  • The difference between what the commercial bank was supposed to get and what the bad bank was able to raise will be paid from the Rs 30,600 crore that has been provided by the government.

Will a bad bank resolve matters?

  • From the perspective of a commercial bank saddled with high NPA levels, it will help.
  • That’s because such a bank will get rid of all its toxic assets, which were eating up its profits, in one quick move.
  • When the recovery money is paid back, it will further improve the bank’s position.
  • Meanwhile, it can start lending again.

Why do we need a bad bank?

  • The idea gained currency during Rajan’s tenure as RBI Governor.
  • The RBI had then initiated an asset quality review (AQR) of banks and found that several banks had suppressed or hidden bad loans to show a healthy balance sheet.
  • However, the idea remained on paper amid lack of consensus on the efficacy of such an institution.
  • ARCs have not made any impact in resolving bad loans due to many procedural issues.
  • While commercial banks resume lending, the so-called bad bank, or a bank of bad loans, would try to sell these “assets” in the market.

Good about the bad banks

  • The problem of NPAs continues in the banking sector, especially among the weaker banks.
  • The bad bank concept is in some ways similar to an ARC but is funded by the government initially, with banks and other investors co-investing in due course.
  • The presence of the government is seen as a means to speed up the clean-up process.
  • Many other countries had set up institutional mechanisms such as the Troubled Asset Relief Programme (TARP) in the US to deal with a problem of stress in the financial system.

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Wildlife Conservation Efforts

Mura-Drava-Danube (MDD) Biosphere Reserve

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MMD Biosphere Reserve, BRs in India

Mains level : Not Much

UNESCO has designated Mura-Drava-Danube (MDD) as the world’s first ‘five-country biosphere reserve’.

About Mura-Drava-Danube BR

  • The biosphere reserve covers 700 kilometres of the Mura, Drava and Danube rivers and stretches across Austria, Slovenia, Croatia, Hungary and Serbia.
  • The total area of the reserve — a million hectares — in the so-called ‘Amazon of Europe’, makes it the largest riverine protected area on the continent.
  • The reserve is home to floodplain forests, gravel and sand banks, river islands, oxbows and meadows.
  • It is home to continental Europe’s highest density of breeding white-tailed eagle (more than 150 pairs), as well as endangered species such as the little tern, black stork, otters, beavers and sturgeons.
  • It is also an important annual resting and feeding place for more than 250,000 migratory birds, according to WWF.
  • Almost 900,000 people live in the biosphere reserve. (UPSC may ask if it is uninhabited.)

Significance of this BR

  • The new reserve represented an important contribution to the European Green Deal and contributes to the implementation of the EU Biodiversity Strategy in the Mura-Drava-Danube region.
  • The strategy’s aim is to revitalize 25,000 km of rivers and protect 30 per cent of the European Union’s land area by 2030.
  • The declaration as BR puts river revitalization, sustainable business practices enhancing cross-border cooperation into focus.

Ignore at your own risk! Its better to correct it here itself.

Such PYQs are ought to repeat any number of times in UPSC CSE.

Q. Consider the following statements:

  1. The boundaries of a National Park are defined by legislation.
  2. A Biosphere Reserve is declared to conserve a few specific species of flora and fauna.
  3. In a Wildlife Sanctuary, limited biotic interference is permitted.

Which of the above statements is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

 

Post your answers here.

Back2Basics: UNESCO Biosphere Reserves

  • Biosphere reserves are ‘learning places for sustainable development’.
  • They are nominated by national governments and remain under the sovereign jurisdiction of the states where they are located.
  • They are designated under the intergovernmental MAB Programme by the Director-General of UNESCO following the decisions of the MAB International Coordinating Council (MAB ICC).
  • Their status is internationally recognized. Member States can submit sites through the designation process.
  • Biosphere reserves include terrestrial, marine and coastal ecosystems.

They integrate three main “functions”:

  1. Conservation of biodiversity and cultural diversity
  2. Economic development that is socio-culturally and environmentally sustainable
  3. Logistic support, underpinning development through research, monitoring, education and training

(a) Core Areas

It comprises a strictly protected zone that contributes to the conservation of landscapes, ecosystems, species and genetic variation

(b) Buffer Zones

It surrounds or adjoins the core area(s), and is used for activities compatible with sound ecological practices that can reinforce scientific research, monitoring, training and education.

(c) Transition Area

The transition area is where communities foster socio-culturally and ecologically sustainable economic and human activities.

UNESCO recognized BRs in India

Year of

recognition

Name

States

2000 Nilgiri Biosphere Reserve Tamil Nadu
2001 Gulf of Mannar Biosphere Reserve Tamil Nadu
2001 Sundarbans Biosphere Reserve West Bengal
2004 Nanda Devi Biosphere Reserve Uttarakhand
2009 Pachmarhi Biosphere Reserve Madhya Pradesh
2009 Nokrek Biosphere Reserve Meghalaya
2009 Simlipal Biosphere Reserve Odisha
2012 Achanakmar-Amarkantak Biosphere Reserve Chhattisgarh
2013 Great Nicobar Biosphere Reserve Great Nicobar
2016 Agasthyamala Biosphere Reserve Kerala and Tamil Nadu
2018 Kanchenjunga Biosphere Reserve Part of North and West Sikkim districts
2020 Panna Biosphere Reserve Madhya Pradesh

 

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Historical and Archaeological Findings in News

Gupta Era Temple uncovered in UP

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Shankhlipi Script, Gupta Period

Mains level : Zenith of arts and cultural development during Gupta Period

Last week, the Archaeological Survey of India (ASI) discovered remains of an ancient temple dating back to the Gupta period (5th century) in a village in Uttar Pradesh’s Etah district.

Findings of the excavation

  • The Bilsarh site was declared ‘protected’ in 1928.
  • Every year, the ASI undertakes scrubbing work at the protected sites.
  • This year, the team discovered two decorative pillars close to one another, with human figurines resembling an ancient temple.
  • The stairs of the temple had ‘shankhalipi’ inscriptions, which were deciphered by the archaeologists as saying, ‘Sri Mahendraditya’, the title of Kumaragupta I of the Gupta dynasty.

You will find tons of PYQs on Gupta Period. Try this recent one:

Q. With reference to the period of Gupta dynasty in ancient India, the towns Ghantasala, Kadura and Chaula were well known as:

(a) ports handling foreign trade

(b) capitals of powerful kingdoms

(c) places of exquisite stone art and architecture

(d) important Buddhist pilgrimage centres

 

Post your answers here.

Who was Kumaragupta I?

  • Kumaragupta I was an emperor of the Gupta Empire of Ancient India.
  • A son of the Gupta emperor Chandragupta II and queen Dhruvadevi, he seems to have maintained control of his inherited territory, which extended from Gujarat in the west to Bengal region in the east.
  • In the 5th century, Kumaragupta I ruled for 40 years over north-central India.
  • Skandagupta, son and successor of Kumaragupta I is generally considered to be the last of the great Gupta rulers.
  • He assumed the titles of Vikramaditya and Kramaditya.

What is the Shankhalipi script?

  • Shankhalipi or “shell-script” is a term used by scholars to describe ornate spiral characters assumed to be Brahmi derivatives that look like conch shells or shankhas.
  • They are found in inscriptions across north-central India and date to between the 4th and 8th centuries.
  • Both Shankhalipi and Brahmi are stylised scripts used primarily for names and signatures.
  • The inscriptions consist of a small number of characters, suggesting that the shell inscriptions are names or auspicious symbols or a combination of the two.

Chronology and meaning

  • The script was discovered in 1836 on a brass trident in Uttarakhand’s Barahat by English scholar James Prinsep, who was the founding editor of the Journal of the Asiatic Society of Bengal.
  • A year later, he came across two more similar scripts at Nagarjuna group of caves in the Barabar Hills near Gaya.
  • Prominent sites with shell inscriptions include the Mundeshwari Temple in Bihar, the Udayagiri Caves in Madhya Pradesh, Mansar in Maharashtra and some of the cave sites of Gujarat and Maharashtra.
  • In fact, shell inscriptions are also reported in Indonesia’s Java and Borneo.
  • Scholars have tried to decipher shell script but have not been successful.

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Back2Basics: Gupta Empire

  • The Gupta Empire was an ancient Indian empire which existed from the early 4th century CE to late 6th century CE.
  • This period is considered as the Golden Age of India by historians.
  • The ruling dynasty of the empire was founded by the king Sri Gupta; the most notable rulers of the dynasty were Chandragupta I, Samudragupta, and Chandragupta II alias Vikramaditya.
  • The 5th-century CE Sanskrit poet Kalidasa credits the Guptas with having conquered about twenty-one kingdoms, both in and outside India, including the kingdoms of Parasikas, the Hunas, the Kambojas, tribes located in the west and east Oxus valleys, the Kinnaras, Kiratas, and others.
  • Many of the literary sources, such as Mahabharata and Ramayana, were canonized during this period.
  • The Gupta period produced scholars such as Kalidasa, Aryabhata, Varahamihira, and Vatsyayana who made great advancements in many academic fields.

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[pib] PLI Scheme for White Goods

Note4Students

From UPSC perspective, the following things are important :

Prelims level : White Goods, PLI Scheme

Mains level : Success of the PLI Scheme

A total of  52 companies have filed their application with a committed investment of Rs 5,866 crore under the PLI scheme to incentivize the domestic manufacturing of components of White Goods.

What are White Goods?

  • White goods refer to heavy consumer durables or large home appliances, which were traditionally available only in white.
  • They include appliances such as washing machines, air conditioners, stoves, refrigerators, etc. The white goods industry in India is highly concentrated.

Why PLI scheme for white goods?

  • Indian appliance and consumer electronics (ACE) market reached INR 76,400 crore (~$10.93 bn) in 2019.
  • Appliances and consumer electronics industry is expected to double to reach INR 1.48 lakh crore (~$21.18 bn) by 2025.
  • The PLI Scheme on White Goods is designed to create complete component ecosystem for Air Conditioners and LED Lights Industry in India and make India an integral part of the global supply chains.
  • Only manufacturing of components of ACs and LED Lights will be incentivized under the Scheme.

What is PLI Scheme?

  • As the name suggests, the scheme provides incentives to companies for enhancing their domestic manufacturing apart from focusing on reducing import bills and improving the cost competitiveness of local goods.
  • PLI scheme offers incentives on incremental sales for products manufactured in India.
  • The scheme for respective sectors has to be implemented by the concerned ministries and departments.

Criteria laid for the scheme

  • Eligibility criteria for businesses under the PLI scheme vary based on the sector approved under the scheme.
  • For instance, the eligibility for telecom units is subject to the achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods.
  • The minimum investment threshold for MSME is Rs 10 crore and Rs 100 crores for others.
  • Under food processing, SMEs and others must hold over 50 per cent of the stock of their subsidiaries, if any.
  • On the other hand, for businesses under pharmaceuticals, the project has to be a greenfield project while the net worth of the company should not be less than 30 per cent of the total committed investment.

What are the incentives offered?

  • An incentive of 4-6 per cent was offered last year on mobile and electronic components manufacturers such as resistors, transistors, diodes, etc.
  • Similarly, 10 percent incentives were offered for six years (FY22-27) of the scheme for the food processing industry.
  • For white goods too, the incentive of 4-6 per cent on incremental sales of goods manufactured in India for a period of five years was offered to companies engaged in the manufacturing of air conditioners and LED lights.

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NITI Aayog’s Assessment

[pib] Reforms in Urban Planning Capacity in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NITI Aayog

Mains level : Evolving concept of urban development

NITI Aayog has launched a report titled ‘Reforms in Urban Planning Capacity in India’ on measures to ramp up urban planning capacity in India.

Reforms in Urban Planning

  • The report has been developed by NITI Aayog, in consultation with concerned ministries and eminent experts in the domain of urban and regional planning.
  • It underscores urban challenges, including town planning and emphasizes need greater policy attention in our country.

Why such report?

  • India is home to 11% of the total global urban population.
  • By 2027, India will surpass China as the most populous country in the world.
  • Unplanned urbanization, however, exerts great strain on our cities. In fact, the Covid-19 pandemic has revealed the dire need for the planning and management of our cities.
  • The existing urban planning and governance framework is complex, which often leads to ambiguity and lack of accountability.

Highlights of the report

The report makes several recommendations that can unblock bottlenecks in the value chain of urban planning capacity in India.  Some of them are:

Programmatic Intervention for Planning of Healthy Cities:

  • Every city must aspire to become a ‘Healthy City for All’ by 2030.
  • The report recommends a Central Sector Scheme ‘500 Healthy Cities Programme’, for a period of 5 years, wherein priority cities and towns would be selected jointly by the states and local bodies.

Programmatic Intervention for Optimum Utilization of Urban Land:

  • All the cities and towns under the proposed ‘Healthy Cities Programme’ should strengthen development control regulations based on scientific evidence to maximize the efficiency of urban land (or planning area).
  • The report recommends a sub-scheme ‘Preparation/Revision of Development Control Regulations’ for this purpose.

Ramping Up of Human Resources:

  • To combat the shortage of urban planners in the public sector, the report recommends that the states/UTs may need to a) expedite the filling up of vacant positions of town planners.
  • It asks to additionally sanction 8268 town planners’ posts as lateral entry positions.

Ensuring Qualified Professionals for Undertaking Urban Planning:

  • State town and country planning departments face an acute shortage of town planners.
  • This is compounded by the fact that in several states, ironically, a qualification in town planning is not even an essential criterion for such jobs.
  • States may need to undertake requisite amendments in their recruitment rules to ensure the entry of qualified candidates into town-planning positions.

Re-engineering of Urban Governance:

  • The report recommends the constitution of a high-powered committee to re-engineer the present urban-planning governance structure.
  • The key aspects that would need to be addressed in this effort are:
  1. clear division of the roles and responsibilities of various authorities, appropriate revision of rules and regulations, etc.,
  2. creation of a more dynamic organizational structure, standardisation of the job descriptions of town planners and other experts, and
  3. extensive adoption of technology for enabling public participation and inter-agency coordination.

Revision of Town and Country Planning Acts:

  • Most States have enacted the Town and Country Planning Acts, that enable them to prepare and notify master plans for implementation.
  • However, many need to be reviewed and upgraded.
  • Therefore, the formation of an apex committee at the state level is recommended to undertake a regular review of planning legislations (including town and country planning or urban and regional development acts or other relevant acts).

Demystifying Planning and Involving Citizens:

  • While it is important to maintain the master plans’ technical rigour, it is equally important to demystify them for enabling citizens’ participation at relevant stages.
  • Therefore, the committee strongly recommends a ‘Citizen Outreach Campaign’ for demystifying urban planning.

Steps for Enhancing the Role of Private Sector:

  • The report recommends that concerted measures must be taken at multiple levels to strengthen the role of the private sector to improve the overall planning capacity in the country.
  • These include the adoption of fair processes for procuring technical consultancy services, strengthening project structuring and management skills in the public sector, and empanelment of private sector consultancies.

Steps for Strengthening Urban Planning Education System:

  • The Central universities and technical institutions in all the other States/UTs are encouraged to offer PG degree programmes (MTech Planning) to cater to the requirement of planners in the country.
  • The committee also recommends that all such institutions may synergize with Ministry of Rural Development, Ministry of Panchayati Raj and respective state rural development departments.

Measures for Strengthening Human Resource and Match Demand–Supply:

  • The report recommends the constitution of a ‘National Council of Town and Country Planners’ as a statutory body.
  • Also, a ‘National Digital Platform of Town and Country Planners’ is suggested to be created within the National Urban Innovation Stack of MoHUA.
  • This portal will enable self-registration of all planners and evolve as a marketplace for potential employers and urban planners.

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Goods and Services Tax (GST)

How not to deal with recession

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Development Council

Mains level : Paper 3- Dealing with the recession

Context

The Centre is facing a serious financial crisis because of the exigencies created by the pandemic and its own policies. However, monetising assets and cutting down funds to states could aggravate the crisis.

3 Policies aggravating the crisis

1) NMP and disinvestment

  • Union Finance Minister, while announcing the National Monetisation Pipeline (NMP), said that asset monetisation is based on the philosophy of creation through monetisation and is aimed at “tapping private sector investment for new infrastructure creation”.
  • Loss of dividend: Disinvestment of profitable Navratna companies will result in a loss of dividend, a major source of income for the Centre.
  • Loss due to tax exemptions: Tax exemptions to the investors will take away another major share of income.
  • Central funds will be squeezed and this, in turn, will have a bearing on state finances.
  • NMP will seriously hurt the interests of the country.

2) Cutting down funds to States

  • Kerala’s case: The state was getting about 3.92 per cent from the divisible pool in the 1970s and 1980s.
  • It came down to 2.66 per cent and 2.34 per cent in the awards of the 12th and 13th Finance Commissions.
  • The 14th Finance Commission award increased it to 2.45 (2.50) per cent.
  • Now, the 15th Finance Commission has reduced it to 1.92 per cent.
  • This arbitrary cut is a result of the adoption of certain new yardsticks by the commission without considering the state government’s views
  • The 15th Finance Commission’s special grant (RD grant) of Rs 19,800 crore for this year will no longer be available in the coming years.
  • Karnataka and many other states have also suffered because of the policy to reduce the divisible pool share.

3) Tax exemptions and surcharge

  • Exemptions amounting to Rs 99,842.06 crore were extended to corporate houses in 2019-20.
  • Many taxes on goods were reduced because of electoral compulsions. This reduced central revenues.
  • Along with such tax exemptions, the increased use of cesses and surcharges is responsible for the shrinking of the shareable pool.
  • The shareable resources with the Centre was around Rs 6.8 lakh crore in 2019-20 which has come down to Rs 5.5 lakh crore in 2020-21.
  • All the cesses and surcharges that are not shared with states come to about 20 per cent of the total revenues of the Centre.
  • States have been demanding that this money should be shared with them, particularly while fighting a pandemic.
  • States complaining for resources does not augur well for cooperative federalism.

Way forward

  • Developing basic infrastructure and the production sector is the only way to face an economic crisis.
  • That should not be done by selling or handing over public assets to private individuals and corporations.
  • We need massive public investment that will help people to form cooperatives and collectives in agriculture and industrial production.
  • Parliament, the National Development Council and the GST Council should discuss this unprecedented situation.

Conclusion

We need to find a way out collectively. Handing over the rights on public properties to private individuals will take the country back to the colonial era. This must not be allowed.

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