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Tax Reforms

Why India’s pro-rich, anti-poor taxation policies must change

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Issues with India's taxation policies

Context

To develop their renewable energy capacities poor countries may well have to help themselves to make the transition that society urgently needs. One source of funding could well be the well-off citizens of India, who are getting richer and richer.

Growing inequality in India

  • A 2018 Oxfam report revealed that 10 per cent of the richest Indians garnered 77.4 per cent of the nation’s wealth.
  •  In fact, according to the report, 58 per cent of India’s wealth was in the hands of one per cent of the country’s population.
  • The combined income of this handful of people in 2017 was almost as much as India’s budget that year.
  • In 2017, the fortune of India’s 100 richest tycoons leaped by 26 per cent.
  •  According to Crédit Suisse, the number of dollar millionaires in India has jumped from 34,000 in 2000 to 7,59,000 in 2019 — in other words, the country has one of “the world’s fastest-growing population of millionaires”.
  • The average wealth of these millionaires has increased by 74 per cent over this period.

Issues with taxation policies

  • The taxation policy of the government, instead of making the exchequer benefit from this trend, has actively strengthened the trend of growing millionaires.
  • Replacing wealth tax by increasing income tax: The government replaced the wealth tax by an income tax increase of two per cent for households that earned more than 10 million rupees annually.
  • Corporate tax was reduced: The corporate tax was lowered, for existing companies from 30 per cent to 22 per cent, and for manufacturing firms incorporated after October 1, 2019 that started operations before March 31, 2023, from 25 to 15 per cent — the biggest reduction in 28 years.
  • Increase in income tax exemptions: In the 2019-20 budget, the income tax exemption limit jumped from Rs 2,00,000 to 2,50,000 and the tax rate for incomes up to Rs 5 lakh was reduced from 10 to 5 per cent.

Impact of pro-rich taxation policy

  • Deprives the state of resources: This taxation policy deprived the state of important resources.
  • Increase in indirect taxes: To (partly) compensate for the decline of direct taxes, the government has increased indirect taxes, unfairly so, because they affect all Indians irrespective of their income.
  • The share of indirect taxes in the state’s fiscal resources has increased to reach 50 per cent of total taxes in 2018.
  • Taxes on petroleum products are a case in point.

High taxes on petroleum products

  • About two-thirds of the cost of a litre of petrol now goes towards taxes.
  • The tax collected on petrol and diesel has increased by 459 per cent in the past seven years — from Rs 52,537 crore in 2013 to Rs 2.13 lakh crore in 2019-2020.
  • Given that petrol is a less elastic good, people are bound to consume it even at higher prices.
  • This also explains why the government sees fuel sale in India as a safe “revenue collection” medium.
  • In 2018-19, excise duty on petroleum products alone accounted for roughly 24 per cent of the indirect tax revenue.

Consider the question “India’s taxation policies are criticised for being pro-rich. In the context of this, discuss the issues with the taxation system and suggest the measure to deal with these issues.”

Conclusion

The government’s taxation policy will probably continue to prevail depriving the exchequer of some of the resources it needs for dealing with issues as important as climate change.

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Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Economic, political implications of repeal of farm laws

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Economic and political implications of repeal of farm laws

Context

In a surprise move, Prime Minister Narendra Modi announced that the government will repeal the farm laws in the Winter Session of Parliament.

Economic impact

  • Agri-growth rate to remain constant: The agri-GDP growth has been 3.5 per cent per annum in the last seven years.
  • One expects this trend to continue — there might be minor changes in the agri-GDP depending on rainfall patterns.
  • Cropping pattern to remain skewed: Cropping patterns will remain skewed in favour of rice and wheat, with the granaries of the Food Corporation of India bulging with stocks of grain.
  • Increase in food subsidy: The food subsidy will keep bloating and there will be large leakages.
  • Environmental impact: The groundwater table in the north-western states will keep receding and methane and nitrous oxide will keep polluting the environment.

Suggestion on increasing farmers income

  • Average agri-household income: The latest Situation Assessment Survey of the NSO reveals that the income of an average agri-household in India was only Rs 10,218 per month in 2018-19.
  • This is not a very happy situation and all out measures need to be taken to increase rural incomes in a sustained manner.
  • How to increase farmers income: Given that the average holding size stands at just 0.9 ha (2018-19), and has been shrinking over the years.
  • Efficient functioning value chain: Unless one goes for high-value agriculture — and, that’s where one needs efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies — the incomes of farmers cannot be increased significantly.
  • Reforms: This sector needs reforms, both in the marketing of outputs as well as inputs, including land lease markets and direct benefit transfer of all input subsidies — fertilisers, power, credit and farm machinery.

Implications

  • Demand for legal status to MSP could strengthen: Farmer leaders are already asking for the legal guarantee of MSPs for 23 agri-commodities.
  • Their demand could increase to include a larger basket of commodities.
  • Demand for privatisation: There could be demands to block the privatisation reforms of public sector enterprises — Air India, for instance — or to scuttle any other reform for that matter.
  • The net result is likely to be slowing down the economic reforms that are desperately needed to propel growth.

Consider the question “The latest Situation Assessment Survey of the NSO reveal the low average agri-household income in India. All out measures need to be taken to increase rural incomes in a sustained manner. In the context of this, suggest the measures to increase the farmers’ income and challenges in it.

Conclusion

The most important lesson from the repeal of the farm laws is that the process of economic reforms has to be more consultative, more transparent and better communicated to the potential beneficiaries. It is this inclusiveness that lies at the heart of democratic functioning of India.

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Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

PM announces repeal of three Farm Laws

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Farm laws, Essential commodities

Mains level: Farmers protests and related issues

The Prime Minister has announced the withdrawal of the contentious farm laws.

Daniel Q. Gillion, author of The Political Power of Protest, and a sociologist at the University of Pennsylvania, says to be successful, a protest must be impossible to ignore.

What were the farm laws that have been repealed?

  1. Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020: It was aimed at allowing trade in agricultural produce outside the existing APMC mandis
  2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020: It seeks to provide a framework for contract farming;
  3. Essential Commodities (Amendment) Act, 2020: It was aimed at removing commodities such as cereals, pulses, oilseeds, edible oils, onion and potato from the list of essential commodities.

Why were these reforms sought?

  • APMC reforms: There has been a long-pending demand for reforms in agricultural marketing, a subject that comes under the purview of state governments.
  • Long pending stagnation: It was in this backdrop that the present government went for reforms in the sector by passing these laws.

In what circumstances were the laws passed?

  • Ordinance route: The government initially cleared them as ordinances in June 2020, there were token protests with the country’s attention gripped by the first wave of Covid-19.
  • Without consultation and haste: In Parliament, there was no thorough scrutiny of the Bills by a parliamentary panel. The government dismissed these demands and pushed the legislation through.
  • Opposition disregard: The Opposition benches were suspended for a week for their “disorderly conduct” while protesting against the rushed passage of the laws.

Beginning of the protests

The protests gained momentum when the Centre pushed the Bills in Parliament in the Monsoon Session.

  • Fear over private mandis: Farmers feared that the existing APMC mandis where they sell their products would be shut down once private players started trading in agri-produce outside the mandi premises.
  • Non-guarantee over MSP: Once the APMC mandi system became redundant, procurement based on minimum support prices (MSP) too would come to an end.

After sporadic protests against the farm laws, including a nationwide road blockade, the farmers’ unions in Punjab and Haryana gave a call for a ‘Delhi Chalo’ movement.

How protests could sustain for so long?

  • Unity: The leaders of farmers’ unions were very strategic in their approach to the protest and decided to work together very early in the agitation.
  • Finances: The protest sites at the Delhi border needed a steady injection of resources to keep going. Aware of this need, the unions had begun making monthly collections.
  • People: The unions behind the farm stir are well-organized machinery with committees at the level of villages, blocks, and districts.
  • Communication: Social media has been central to the scale of this agitation.
  • Engagement: The unions kept the stakeholders engaged by ensuring that there was never a dull moment in this agitation.

In practical terms, what was the status of the three laws until the repeal?

  • The farm laws were in force for only 221 days — June 5, 2020, when the ordinances were promulgated to January 12, 2021, when the Supreme Court stayed their implementation.
  • The Supreme Court stayed the implementation of the three laws on January 12 this year.
  • Since the stay, the laws have been suspended.
  • The government has used old provisions of the Essential Commodities Act, 1955 to impose stock limits, having amended the Act through one of the three farm laws.

Reasons for the repeal

There are contrasting suggestions about the timing of the decision to announce the repeal.

  • Forthcoming elections: There are crucial Assembly elections early next year in five states, including Uttar Pradesh and Punjab.
  • Public appeasement: The PM sought to announce this on Guru Nanak Jayanti probably in a move to appease a community, to which a significant segment of protesting farmers from Punjab belongs.
  • Rising anxiety among Public: There was a risk that anxiety among the protesters could lead to tensions as there had been many deaths since the protests began.
  • Fury over year-long protests: The protest had created a ruckus on the streets of capital due to continuous blockades even after the intervention of Supreme Court.
  • Rising political differences: Given that it took the government a year to realise the socio-political costs, the repeal also signals a weakened political feedback mechanism within the party.

Significance of the repeal

  • Restores faith in the govt: In the immediate term, the repeal exposes the government to charges of being on the wrong path and against popular sentiments, notwithstanding its claims to the contrary.
  • Dedication over farmers’ cause: The govt moves were increasingly perceived as being not in tune with the needs of rural farming communities.
  • Political stewardship: The PM was clearly balancing his political posture that has thrived on the image of strong and decisive leadership.

Implications of the repeal

  • CAA standpoint: Although the anti-CAA protests were called off, almost two years on, the Home Ministry has not yet framed the rules for implementation of the CAA.
  • Statehood for J&K: There is no such unanimity over Article 370. Most of these parties have largely been united for the restoration of statehood to J&K, and early elections.

An analysis of the enactment-repeal conundrum

(1) Reforms are must

  • There may be some deficiencies in the exact design and mechanism of the reforms proposed in the three farm laws.
  • However, most advocates of agricultural reform would agree that they were in the right direction.

(2) Reforms don’t occur overnight

  • These laws could be a great example for passionate reforms. However, Legislative tapasya (penance) is all about listening to outer world (i.e the farmers), not inner self.
  • It requires listening to those for whose benefit laws and policies are crafted. It can’t be a meditation in isolation and implementation as a divine ordeal.

(3) Answerability and consultation matters

  • That the government chose to push these reforms through its own set of consultations left many stakeholders feeling left out, and created a backlash.
  • The repeal underlines that any future attempts to reform the rural agricultural economy would require a much wider consultation.

(4) Success lies in the acceptance of reforms

  • The better design of reforms ensures wider acceptance.
  • The repeal would leave the government hesitant about pursuing these reforms in stealth mode again.

 

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Panchayati Raj Institutions: Issues and Challenges

25 years of Panchayats (Extension to the Scheduled Areas) Act, 1996 (PESA)

Note4Students

From UPSC perspective, the following things are important :

Prelims level: PESA, FIfth Schedule

Mains level: Tribal autonomy and self-government issues

The Ministry of Tribal Affairs has celebrated the 25th year of the inauguration of the Panchayats (Extension to Scheduled Areas) Act 1996 (PESA)’ as a part of Azadi Ka Amrit Mahotsav.

What is PESA?

  • The PESA is a law enacted by the govt. for ensuring self-governance through traditional Gram Sabhas for people living in the Scheduled Areas of India.
  • Scheduled Areas are areas identified by the Fifth Schedule of the Constitution of India.

What are Scheduled Areas?

  • “Scheduled Areas” mean the Scheduled Areas as referred to in Clause (1) of Article 244 of the Constitution.
  • They are found in ten states of India which have predominant population of tribal communities.
  • At present, Scheduled Areas have been declared in the States of AP (including Telangana), Chhattisgarh, Gujarat, Himachal Pradesh, Jharkhand, MP, Maharashtra, Odisha and Rajasthan.

Powers granted to Gram Sabha/Panchayats

  • Land acquisition: To be consulted on matters of land acquisition and resettlement.
  • Mining licencing: Grant prospecting license for mining lease for minor minerals and concessions for such activities.
  • Water Bodies: Planning and management of minor water bodies.
  • Regulation of Liquor: The power to enforce prohibition or to regulate or restrict the sale and consumption of any intoxicant.
  • Minor Forest Produces: The ownership of MFPs
  • Land reforms: The power to prevent alienation of land and to restore any unlawfully alienated land of a scheduled tribe.
  • Village Markets: The power to manage village markets.
  • Money Lending: The power to exercise control over money lending to scheduled tribes.

Role of Governor in Implementation of PESA

(1) Report as sought by the President:

  • As per para 3 of the Fifth Schedule, the Governor therein is required to make a report to the President regarding the administration of the Scheduled Areas.
  • The Attorney General had advised the Home Ministry that the role of the governor in sending this report is discretionary.

(2) Applicability of certain laws:

  • An even more significant role of the Governor in scheduled areas arises out of the powers inherent in sub-para (1) of Para 5 of the Fifth Schedule.
  • Governor may direct that any particular Act of Parliament or of the Legislature of the State shall not apply to a Scheduled Area or any part thereof in the State or shall apply to a Scheduled Area.

(3) Modification of laws:

  • The regulation-making powers of the Area is bound neither by the advice of the Tribes Advisory Council or the assent of the President.
  • The provision lays down the responsibility on the Governor to ensure that laws that are contrary to the interests of Scheduled Areas may be suitably modified.

Why was PESA enacted?

  • Filling the constitutional vacuum: These Areas were not covered by the 73rd Constitutional Amendment or Panchayati Raj Act of the Indian Constitution as provided in Part IX of the Constitution.
  • Self-governance: PESA sought to enable the Panchayats at appropriate levels and Gram Sabhas to implement a system of self-governance.
  • Customary regulation: It includes a number of issues such as customary resources, minor forest produce, minor minerals, minor water bodies, selection of beneficiaries, sanction of projects, and control over local institutions.

Significance of PESA

  • Tribal autonomy: PESA was seen as a panacea for many of these vulnerabilities where the tribal communities in such Scheduled Areas were to decide by themselves the pace and priorities of their development.
  • Tribal way of development: PESA was viewed as a positive development for tribal communities in Scheduled Areas that had earlier suffered tremendously from engagement with modern development processes.
  • Sustainable access to forests: The loss of access to forest, land, and other community resources had increased their vulnerability.
  • Easing of tribal distress: Rampant land acquisition and displacement due to development projects had led to large-scale distress in tribal communities living in Scheduled Areas.

Issues with PESA

  • Dilution of the role of Tribal Advisory Councils: PESA mandates Tribal Advisory Councils to oversee tribal affairs and also gives extrajudicial, extra-constitutional powers to the Governors.
  • Politicization: The councils, with the CM as their chairperson, have evolved into a non-assertive institution amid the machinations of upper-class politics.
  • Non-involvement: The Governors, in order to have friendly relations with the Chief Ministers, have desisted from getting involved in tribal matters.
  • Lack of coordination at Centre: Two different ministries, the Ministry of Panchayati Raj and the Ministry of Tribal Affairs, have an overlapping influence and they function almost without any coordination.
  • Lack of operationalization: In most of the state the enabling rules are not in place more than eight years after the adoption of the Act suggests the reluctance to operationalize the PESA mandate.
  • Ignoring the spirit of PESA: The state legislations have omitted some of the fundamental principles without which the spirit of PESA can never be realised.
  • Ambiguous definitions: No legal definition of the terms like minor water bodies, minor minerals etc. exist in the statute books.

Related question in CS Mains:

Q. What are the two major legal initiatives by the State since Independence addressing discrimination against Scheduled Tribes (STs)? (2017, 150W)

Also try answering this PYQ:

In the areas covered under the Panchayat (Extension to the Scheduled Areas) Act, 1996, what is the role/power of Gram Sabha?

  1. Gram Sabha has the power to prevent alienation of land in the Scheduled Areas.
  2. Gram Sabha has the ownership of minor forest produce.
  3. Recommendation of Gram Sabha is required for granting prospecting license or mining lease for any mineral in the Scheduled Areas.

Which of the statements given above is/are correct?

(a) Only 1

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

 

Post your answers here:

 

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Uniform Civil Code: Triple Talaq debate, Polygamy issue, etc.

HC presses Centre on Uniform Civil Code

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Articles mentioned in the newscard

Mains level: Uniform Civil Code

Stating that the Uniform Civil Code “is a necessity and mandatorily required today,” the Allahabad High Court has called upon the Central Government to forthwith initiate the process for its implementation.

What is a Uniform Civil Code?

  • A Uniform Civil Code is one that would provide for one law for the entire country, applicable to all religious communities in their personal matters such as marriage, divorce, inheritance, adoption etc.
  • Article 44, one of the directive principles of the Constitution lays down that the state shall endeavour to secure a Uniform Civil Code for the citizens throughout the territory of India.
  • These, as defined in Article 37, are not justiciable (not enforceable by any court) but the principles laid down therein are fundamental in governance.

Why need UCC?

  • UCC would provide equal status to all citizens
  • It would promote gender parity in Indian society.
  • UCC would accommodate the aspirations of the young population who imbibe liberal ideology.
  • Its implementation would thus support the national integration.

Issues with UCC

  • There are practical difficulties due to religious and cultural diversity in India.
  • The UCC is often perceived by the minorities as an encroachment on religious freedom.
  • It is often regarded as interference of the state in personal matters of the minorities.
  • Experts often argue that the time is not ripe for Indian society to embrace such UCC.

Greater role for State

  • Fundamental rights are enforceable in a court of law.
  • While Article 44 uses the words “state shall endeavour”, other Articles in the ‘Directive Principles’ chapter use words such as “in particular strive”; “shall in particular direct its policy”; “shall be obligation of the state” etc.
  • Article 43 mentions “state shall endeavour by suitable legislation” while the phrase “by suitable legislation” is absent in Article 44.
  • All this implies that the duty of the state is greater in other directive principles than in Article 44.

What are more important — fundamental rights or directive principles?

  • There is no doubt that fundamental rights are more important.
  • The Supreme Court held in Minerva Mills (1980): Indian Constitution is founded on the bed-rock of the balance between Parts III (Fundamental Rights) and IV (Directive Principles).
  • To give absolute primacy to one over the other is to disturb the harmony of the Constitution.
  • Article 31C inserted by the 42nd Amendment in 1976, however, lays down that if a law is made to implement any directive principle, it cannot be challenged on the ground of being violative of the FRs under Articles 14 and 19.

Does India not already have a uniform code in civil matters?

  • Indian laws do follow a uniform code in most civil matters – Indian Contract Act, Civil Procedure Code, Sale of Goods Act, Transfer of Property Act, Partnership Act, Evidence Act etc.
  • States, however, have made hundreds of amendments and therefore in certain matters, there is diversity even under these secular civil laws.
  • Recently, several states refused to be governed by the uniform Motor Vehicles Act, 2019.

What about personal laws?

  • If the framers of the Constitution had intended to have a Uniform Civil Code, they would have given exclusive jurisdiction to Parliament in respect of personal laws, by including this subject in the Union List.
  • But “personal laws” are mentioned in the Concurrent List.
  • Last year, the Law Commission concluded that a Uniform Civil Code is neither feasible nor desirable.

Is there one common personal law for any religious community governing all its members?

  • All Hindus of the country are not governed by one law, nor are all Muslims or all Christians.
  • Not only British legal traditions, even those of the Portuguese and the French remain operative in some parts.
  • In Jammu and Kashmir until August 5, 2019, local Hindu law statutes differed from central enactments.
  • The Shariat Act of 1937 was extended to J&K a few years ago but has now been repealed.

Various customary laws

  • Muslims of Kashmir were governed by a customary law, which in many ways was at variance with Muslim Personal Law in the rest of the country and was, in fact, closer to Hindu law.
  • Even on registration of marriage among Muslims, laws differ from place to place. It was compulsory in J&K (1981 Act), and is optional in Bengal, Bihar (both under 1876 Act), Assam (1935 Act) and Odisha (1949 Act).
  • In the Northeast, there are more than 200 tribes with their own varied customary laws.
  • The Constitution itself protects local customs in Nagaland. Similar protections are enjoyed by Meghalaya and Mizoram.
  • Even reformed Hindu law, in spite of codification, protects customary practices.

How does the idea of a Uniform Civil Code relate to the fundamental right to religion?

  • Article 25 lays down an individual’s fundamental right to religion;
  • Article 26(b) upholds the right of each religious denomination or any section thereof to “manage its own affairs in matters of religion”;
  • Article 29 defines the right to conserve distinctive culture.
  • An individual’s freedom of religion under Article 25 is subject to “public order, health, morality” and other provisions relating to FRs, but a group’s freedom under Article 26 has not been subjected to other fundamental rights
  • In the Constituent Assembly, there was division on the issue of putting UCC in the fundamental rights chapter. The matter was settled by a vote.
  • By a 5:4 majority, the fundamental rights sub-committee headed by Sardar Patel held that the provision was outside the scope of FRs and therefore the UCC was made less important than freedom of religion.

Minority opinion in the Constituent Assembly

  • Some members sought to immunize Muslim Personal Law from state regulation.
  • Mohammed Ismail, who thrice tried unsuccessfully to get Muslim Personal Law exempted from Article 44, said a secular state should not interfere with the personal law of people.
  • B Pocker Saheb said he had received representations against a common civil code from various organisations, including Hindu organisations.
  • Hussain Imam questioned whether there could ever be uniformity of personal laws in a diverse country like India.
  • B R Ambedkar said “no government can use its provisions in a way that would force the Muslims to revolt”.
  • Alladi Krishnaswami, who was in favour of a UCC, conceded that it would be unwise to enact UCC ignoring strong opposition from any community.
  • Gender justice was never discussed in these debates.

How did the debate on a common code for Hindus play out?

  • In June 1948, Rajendra Prasad, President of the Constituent Assembly, warned Nehru that to introduce “basic changes” in personal law was to impose “progressive ideas” of a “microscopic minority” on the Hindu community as a whole.
  • Others opposed to reforms in Hindu law included Sardar Patel, Pattabhi Sitaramayya, M A Ayyangar, M M Malaviya and Kailash Nath Katju.
  • When the debate on the Hindu Code Bill took place in December 1949, 23 of 28 speakers opposed it.
  • On September 15, 1951, President Prasad threatened to use his powers of returning the Bill to Parliament or vetoing it. Ambedkar eventually had to resign.
  • Nehru agreed to the trifurcation of the Code into separate Acts and diluted several provisions.

 

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