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  • Civil Services Reforms

    [pib] Appointment of the UPSC Chairman

    The President of India has appointed Pradeep Kumar Joshi as Chairman of Union Public Service Commission (UPSC).

    Try this PYQ:

    Q.Consider the following statements:

    1. The Executive Power of the Union of India is vested in the Prime Minister.
    2. The Prime Minister is the ex-officio Chairman of the Civil Services Board.

    Which of the statements given above is/are correct? (CSP 2015)

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Backgrounder: UPSC

    • Established on 1 October 1926 as Public Service Commission, it was later reconstituted as Federal Public Service Commission by the GoI Act 1935; only to be renamed as today’s UPSC after the independence.
    • The UPSC is India’s premier central recruiting agency responsible for appointments to and examinations for All India services and group A & group B of Central services.
    • The Department of Personnel and Training is the central personnel agency in India.
    • It is also required to be consulted by the Government in matters relating to the appointment, transfer, promotion and disciplinary matters.

    Appointments to the UPSC

    • As per Article 316 of the constitution, the Chairman and other members of UPSC shall be appointed by the President.
    • In case the office of the Chairman becomes vacant his duties shall be performed by one of the other members of the Commission as the President may appoint for the purpose.
    • Under Art. 318, the President is empowered to determine the number of members of the Commission and their conditions of service.
    • As per Art 319, a person who holds office as Chairman shall, on the expiration of his term of office, be ineligible for re-appointment to that office.
    • But, a member other than the Chairman shall be eligible for appointment as the Chairman of the UPSC.
    • Also, the Chairman of a State PSC shall be eligible for appointment as the Chairman or any other member of the UPSC.

    Removal of members/chairman

    • As per Art. 317, the Chairman or any other member of a UPSC shall only be removed from their office by order of the President on the ground of “misbehaviour” after the Supreme Court inquiry report.
    • The President may suspend the Chairman or other member of the Commission until a report of the Supreme Court is received.

    Distinguishing features

    • The commission reports directly to the President and can advise the Government through him.
    • Although, such advice is not binding on the Government.
    • Being a constitutional authority, UPSC is amongst the few institutions which function with both autonomy and freedom, along with the country’s higher judiciary and lately the Election Commission.
  • Digital India Initiatives

    [pib] Krishi Megh: A Cloud-based Data Recovery Centre

    Union Minister of Agriculture & Farmers’ Welfare has launched the Krishi Megh Data Recovery Centre.

    Do not get confused with the name ‘Krishi Megh’. One might mistakenly relate it to some weather forecasting tool of the Indian Meteorological Department.

    Krishi Megh

    • The Krishi Megh has been set up at National Academy of Agricultural Research Management (NAARM), Hyderabad.
    • It has been set up under the National Agricultural Higher Education Project (NAHEP), funded by both the government and World Bank.
    • It has been built to mitigate the risk, enhance the quality, availability and accessibility of e-governance, research, extension and education in the field of agriculture in India.
    • Currently, the main data centre of the Indian Council of Agricultural Research (ICAR) is at the Indian Agricultural Statistics Research Institute (IASRI) in New Delhi.

    Back2Basics: Cloud Storage

    • It is a cloud computing model that stores data on the Internet through a cloud computing provider who manages and operates data storage as a service.
    • It is delivered on demand with just-in-time capacity and costs, and eliminates buying and managing your own data storage infrastructure.
    • It gives agility, global scale and durability, with “anytime, anywhere” data access.
  • Foreign Policy Watch: India-Afghanistan

    In news: Loya Jirga

    The Afghan Loya Jirga approves release of 400 ‘hard-core’ Taliban prisoners.

    The term seems peculiar. We may expect a prelim question on the same.

    What is Loya Jirga?

    • A Loya Jirga is a special type of jirga, or legal assembly, in Pashtunwali, the traditional code of laws of the Pashtun people.
    • It is mainly organized for choosing a new head of state in case of sudden death, adopting a new constitution, or to settle national or regional issue such as war.
    • It predates modern-day written or fixed laws and is mostly favoured by the Pashtun people but to a lesser extent by other nearby groups that have been influenced by Pashtuns (historically known as Afghans).
    • In Afghanistan, Loya Jirgas have been reportedly organized since at least the early 18th century when the Hotaki and Durrani dynasties rose to power.
  • Goods and Services Tax (GST)

    Making up for shortfalls in GST collection

    The article deals with the issue of shortfall in the GST compensation cess and the challenge Central government faces to pay the promised compensation to the states.

    Background of the cess

    • GST subsumed several taxes, including those which were the preserve of the States.
    • Therefore it required an amendment to the Constitution of India.
    • The amendment affected the Seventh Schedule, so it required ratification by the legislatures of half the States.
    • Before the GST, States exporting goods to other States collected a tax.
    • But the GST is a destination-based tax, i.e., the State where the goods are sold receive the tax.
    • This implies that manufacturing States would lose out while consuming States would benefit.
    • So, in order to convince manufacturing States to agree to GST, a compensation formula was created.
    • Under which States were promised compensation for loss of revenue for a period up to five years.
    • The Act for compensation to states assumed that the GST revenue of each State would grow at 14% every year, from the amount collected in 2015-16.
    • This scheme is valid for five years, i.e., till June 2022.

    Compensation cess fund

    • A compensation cess fund was created from which States would be paid for any shortfall.
    • An additional cess would be imposed on certain items and this cess would be used to pay compensation.
    • The Act states that the cess collected and “such other amounts as may be recommended by the [GST] Council” would be credited to the fund.
    • In the first two years of this scheme, the cess collected exceeded the shortfall of States.
    • In the third year, 2019-20, the fund fell significantly short of the requirement.

    The problem and its source

    •  A key source of the problem is that the 2017 Act guaranteed a tax growth rate of 14%, which is unachievable this year.
    • The 14% target was too ambitious to start with.
    • Given the government’s inflation target at 4%, this implied a real GDP growth plus tax buoyancy of 9%.
    • But, the Central government is constitutionally bound to compensate States for loss of revenue for five years.

    Solution to the problem

    1) The Constitution could be amended to reduce the period of guarantee to three years thus ending June 2020.

    • But most States would be reluctant to agree to this proposal.
    • It could also be seen as going back on the promise made to States.

    2) The Central government could fund this shortfall from its own revenue.

    •  The Centre’s finances are stretched due to shortfall in its own tax collection combined with extra expenditure to manage the health and economic crisis.

    3) The Centre could borrow on behalf of the cess fund.

    • The tenure of the cess could be extended beyond five years until the cess collected is sufficient to pay off this debt and interest on it.

    4) the Centre could convince States that the 14% growth target was always unrealistic.

    • If the Centre can negotiate with States through the GST Council to reset the assured tax level, it could then bring in a Bill in Parliament to amend the 2017 Act.

    Consider the question “What were the reasons for making provisions under GST for paying the states compensation for tax revenue shortfall? What are the implications of the provision for the Central government?”

    Conclusion

    The Constitution makes it obligatory for the Centre to make up for shortfall by the States. The cess collected will not be sufficient for this purpose. The GST Council, which is a constitutional body with representation of the Centre and all the States, should find a practical solution.

    B2BASICS

    Source: https://www.thehindu.com/opinion/op-ed/making-up-for-shortfalls-in-gst-collection/article32319744.ece

  • Foreign Policy Watch: India-United States

    A new direction for India-U.S. ties

    This article analyses what the new shift in the India-U.S. ties will require for the mutual benefit.

    Following 12 factors would influence the depth and longevity of the India-U.S. ties.

    1) Outcome of the  U.S. Presidential elections

    • The success of India’s new bonding with the U.S. will depend on the outcome of the U.S. Presidential elections.
    • The Democratic party candidate with the Left wing and liberals in the U.S. has been highly critical of the Citizenship (Amendment) Act.

    2) Need to build trust with the U.S.

    • India purchased of the S-400 air defence missile system from Russia disregarding the U.S. concerns.
    • India refused to send Indian troops to Afghanistan.
    • We need to build trust with the U.S. that we will give to the U.S. as good as it gives us.
    • For this structuring we must realise that India-U.S. relations require give and take on both sides.
    • What India needs to take today is for dealing with the Ladakh confrontation with China.
    • India needs U.S. hardware military equipment.

    3)  Fighting the U.S. enemy in neighbourhood

    • The U.S. needs India to fight her enemies in the neighbourhood such as in Afghanistan.
    • India should send two divisions gradually to Afghanistan and relieve U.S. troops to go home

    4) Intelligence sharing and cooperation

    • India needs the support of the U.S. and its ally, Israel, in cyberwarfare, satellite mappings of China and Pakistan.
    • There is a need for sharing intercepts of electronic communication, hard intelligence on terrorists, and controlling the military and the Inter-Services Intelligence in Pakistan.

    5) Developing naval bases

    • India needs the U.S. to completely develop the Andaman & Nicobar, and also the Lakshadweep Islands as a naval and air force base.
    • These naval bases can be used by the U.S  and shared along with its allies such as Indonesia and Japan.

    6) Economic relations and India’s concerns

    • The economic relations must be based on macroeconomic commercial principles.
    • Free, indiscriminate flow of U.S. foreign direct investment (FDI) is not in India’s national interest.

    7) Technology sharing

    • India needs technologies such as thorium utilisation, desalination of sea water, and hydrogen fuel cells.

    8) U.S. should allow import of agricultural product

    • The U.S. must allow India’s exports of agricultural products including Bos indicus milk, which are of highly competitive prices in the world.

    9) FDI in India

    • FDI should be allowed into India selectively from abroad, including from the U.S.
    • FDI in India should be based on the economic theory of comparative advantage and not on subsidies and gratis.

    10) Tariffs

    • Tariffs of both India and the U.S. should be lowered, and the Indian rupee should be gradually revalued to ₹35 to a dollar.
    • Later, with the economy picking up, the rupee rate should go below 10 to the dollar.

    11) Stay away from certain issues

    •  India should not provide the U.S. with our troops to enter Tibet, or be involved in the Hong Kong and Taiwan issue.
    • There is always a possibility of a leadership change in China.
    • Thus, China’s policy changed very favourably towards India.
    • In the cases of Tibet, Taiwan, and Hong Kong, we have made explicit agreements.
    • In the case of Tibet, two formal treaties were signed by Nehru (1954) and A.B. Vajpayee (2003).

    12) Trilateral commitment to world peace

    • In the long run, India, the U.S., and China should form a trilateral commitment for world peace provided Chinese current international policies undergo a healthy change.

    Consider the question “What are the factors influencing the India-U.S. ties? Suggest the pathway to address the issues that hamper the deepening of India-U.S. ties.”

    Conclusion

    Both countries need to recognise each other’s concern and work towards the deepening of the ties for the mutual benefit and with a view to dealing with the challenges confronting both the countries.

  • Foreign Policy Watch: India-China

    What India should consider about the proposition to isolate China

    The economic grip China exerts on the world protects it from the threat of isolation. This article examines this issue and its implications for India.

    Worsening U.S.-China ties and implications for other countries

    • After years of cooperating with one another, the U.S. and China are currently at the stage of confrontation.
    • Both are seeking allies to join their camps.
    • This places several countries in Asia, in a difficult position as most of them, loathe to take sides.
    • The U.S. may not necessarily be the first choice for many countries of Asia and the Asia-Pacific region.
    • In the case of China, it is clearly more feared than loved.

    China’s aggression

    •  Beijing’s virtual takeover of Hong Kong has only confirmed what had long been known about China’s intentions.
    • In March-April this year, China further stepped up its aggressive actions, renaming almost 80 geographical features in the region as an index of Chinese sovereignty.
    •  Taiwan, Japan, Vietnam, Indonesia and South Korea have all complained about China’s menacing postures in their vicinity.

    How countries are resisting China

    • Hardly any country in Asia is willing to openly confront China, and side with the U.S.
    • East Asian countries explain that China was always known to be over-protective of the South China Sea.
    • And China consider South China Sea a natural shield against possible hostile intervention by outside forces inimical to it.
    • No U.S. assurance and Chinese aggression has been enough to make countries in the region openly side with the U.S. and against China.

    China’s economic grip and lessons for India

    • Despite a series of diktats from Washington to restrict economic and other relations, China remains unfazed.
    • China seems confident that its stranglehold on the global economy ensures that it does not face any real challenge.
    • It would be wise for India to recognise this.
    • It is equally necessary to realise how fickle some of these countries can be when it comes to economic issues.
    •  At a recent meeting in Washington Australia (a member of the Quad) made it clear that China is important for Australia.
    • Likewise, the U.K.’s Secretary of State for Foreign and Commonwealth Affairs, recently stated in its Parliament, that the U.K. wants a positive relationship with China.
    • It is evident that few nations across the world are willing to risk China’s ire because of strong economic ties.

    India’s relations with neighbouring countries: concerns

    • India’s relations with Nepal, meanwhile, have hit a roadblock over the Kalapani area.
    • In Sri Lanka, the return of the Rajapaksas to power after the recent elections does not augur too well for India-Sri Lanka relations.
    • The strain in India-Bangladesh relations is a real cause for concern since it can provide a beachhead against Chinese activities in the region.

    Growing Chinese presence in India’s sphere of influence

    •  In July, the Chinese Foreign Minister organised a virtual meeting of the Foreign Ministers of Nepal, Afghanistan and Pakistan.
    • In this meeting, China proposed economic corridor plan with Nepal, styled as the Trans-Himalayan Multi-Dimensional Connectivity Network.
    • China has also made headway in Iran to an extent, again at India’s expense.

    Conclusion

    Geo-balancing is not happening to China’s disadvantage. This lesson must be well understood when India plan its future strategy.

  • Tax Reforms

    Increasing dependence on indirect taxes and issues with it

    India, with a tax-GDP ratio of 10.9 per cent in 2019 needs an overhaul of its tax system. This article analyses India’s growing dependence on indirect taxes and its implications for the poor.

    Important changes in direct taxes

    • The wealth tax was abolished in 2016.
    • Wealth tax was replaced by a 2 per cent surcharge on super-rich individuals with taxable income of over Rs 10 crore.
    • But the government rolled back the increase in surcharge in 2019.
    • Corporate taxes were slashed from 30 per cent to 22 per cent to attract foreign investors and induce Indian companies to invest.
    •  Cuts in corporate tax that have resulted in a revenue loss of Rs 1.5 lakh crore have contributed to making the state poor.

    Increasing indirect taxes and cess

    • The share of indirect taxes has increased by up to 50 per cent of the gross tax revenue in FY2019 from 43 per cent in FY2011.
    • The combined share of customs and excise duties and value-added tax reached an all-time high of 10.5 per cent of GDP.
    • This high was following a three-year-long steady increase in customs or excise duty on commonly used goods, such as petroleum products, metals and sugar, automobiles and consumer durables.
    • This is also when the service tax was hiked steadily to 18 per cent under GST from 12.4 per cent in 2014.
    • Swachh Bharat cess and Krishi Kalyan cesses were imposed in addition to GST.
    • The permanent nature of these cesses has been widely opposed by the states and criticised by the CAG.
    • CAG has pointed out the lack of transparency and incomplete reporting in accounts on the utilisation of amounts collected under cesses.
    • All of this is troubling because indirect taxes often penalise the poor and the middle class more than the rich.

    Case for the wealth tax

    • High tax rates on the wealthy in Europe have played a key role in ensuring a strong social security net for the poor.
    • This successful example should encourage India to consider the rationale for a wealth tax.
    • Higher taxes on the super-rich could be used for cash transfers and a fiscal stimulus, that, in India, at 1 per cent of GDP each, have been negligible so far.
    • A wealth tax, a COVID-19 cess on the super-rich and a surcharge on the super-rich for their income from listed equity shares are critical for mitigating the current situation.

    Issues with such policy

    • Cuts in corporate taxes, increased indirect tax revenues, decreased capital expenditure and practically no change in revenue expenditure on health and education show that India’s taxation policy is more business-friendly than pro-poor.
    • This is happening at a time when a supply-side oriented approach to the economy is counter-cyclical.
    • Faced with increased expenditure amid pandemic Centre increased the duty on fuel by a record Rs 10 per litre on petrol when global crude prices have been falling.
    • This speaks of the government’s increased dependency on indirect tax-based revenues.

    Examine the implications of India’s growing dependence on indirect tax revenue? Suggest the measures to reduce such dependence.

    Conclusion

    COVID-19 may be a blessing in disguise if it allows India to reform its tax system in order to make it work towards inclusive growth and sustainable development rather than targeting only investment-led economic growth.

    bACK 2 BASICS
    GO THROUGH THE ARTICLE BELOW FOR MORE INFORMATION ON TAXATION:

    Taxation in India: Classification, Types, Direct tax, Indirect tax

  • Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

    What is Balance of Payments?

    India’s balance of payments this year is going to be “very very strong” on the back of significant improvement in exports and a fall in imports said the Commerce and Industry Ministry.

    Try this PYQ:

    Q.In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? (CSP 2019)

    1. The foreign currency earnings of India’s IT sector
    2. Increasing the government expenditure
    3. Remittances from Indians abroad

    Select the correct answer using the code given below.

    (a) 1 only

    (b) 1 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    Balance of Payment

    • BOP is the oldest and the most important statistical statement for any country.
    • In a nutshell BOP of a country is “a systematic record of all economic transactions between the residents of one country with the residents of the other country in a financial year”.
    • Economic Transactions include all the foreign receipts and payments made by a country during a given financial year.
    • Foreign receipts include all the earnings and borrowings by a country from the other countries.

    Read the complete thread, here, at:

    India’s Balance of Payments: Current Account, Capital Account, Goods and Services Account

  • Foreign Policy Watch: India-Pakistan

    Back in news: Indus Water Treaty (IWT)

    India has refused a request by Pakistan to hold a meeting on issues around the Indus Water Treaty (IWT) at the Attari check post near the India-Pakistan border.

    The IWT has been in existence since 1960, and reached a flash point in the aftermath of the Uri attacks in 2016 with PM declaring that “blood and water couldn’t flow together”.

    About Indus Waters Treaty, 1960

    • The IWT is a water-distribution treaty between India and Pakistan, brokered by the World Bank signed in Karachi in 1960.
    • According to this agreement, control over the water flowing in three “eastern” rivers of India — the Beas, the Ravi and the Sutlej was given to India
    • The control over the water flowing in three “western” rivers of India — the Indus, the Chenab and the Jhelum was given to Pakistan
    • The treaty allowed India to use western rivers water for limited irrigation use and unrestricted use for power generation, domestic, industrial and non-consumptive uses such as navigation, floating of property, fish culture, etc. while laying down precise regulations for India to build projects
    • India has also been given the right to generate hydroelectricity through the run of the river (RoR) projects on the Western Rivers which, subject to specific criteria for design and operation is unrestricted.

    Talks stalled on key projects

    • Among the key points on the table was evolving a procedure to solve differences on technical aspects governing the construction of the Ratle run-of-the-river (RoR) project on the Chenab in the Kishtwar district.
    • India has called for the appointment of a ‘neutral’ party while Pakistan favours a Court of Arbitration to agree upon a final resolution on the design parameters of this hydropower project.
    • According to the IWT, India has the right to build RoR projects on the three ‘western’ rivers — the Chenab, Jhelum and Indus — provided it does so without substantially impeding water flow in Pakistan downstream.
    • Pakistan believes that the project’s current design does pose a serious impediment and has told the World Bank that it wants a Court of Arbitration (CoA) set up to decide on the issue.
    • India says this is only a technical issue and mutually solvable.
  • Defence Sector – DPP, Missions, Schemes, Security Forces, etc.

    What is the Negative Imports List for Defence?

    The Defence Ministry announced a list of 101 items that it will stop importing.

    Try this question for mains:

    Q.Being one of the top importers of defence equipment India is well placed to enhance its domestic manufacturing capacity of defence equipment. Yet, India lacks it after repeated attempts to achieve it. Examine the reasons for this and suggest measures to overcome this anomaly.

    Negative Imports List

    • The negative list essentially means that the Armed Forces—Army, Navy and Air Force—will only procure all of these 101 items from domestic manufacturers.
    • The manufacturers could be private sector players or Defence Public Sector Undertakings (DPSUs).

    Why such a decision?

    • Reduce imports: As per the Stockholm International Peace Research Institute, which tracks defence exports and imports globally, India has been the second-largest importer between 2014 and 2019 with US$ 16.75 billion worth of imports.
    • Boost domestic industry: By denying the possibility of importing the items on the negative list, the domestic industry is given the opportunity to step up and manufacture them for the needs of the forces.
    • Boost exports: The government has been hoping that the defence manufacturing sector can play a leading role in boosting the economy, not just for the domestic market, but to become an exporter as well.

    Items included in the negative list

    The items mentioned in the negative imports list include:

    • water jet fast attack craft to survey vessels, pollution control vessels, light transport aircraft, GSAT-6 terminals, radars, unmanned aerial vehicles, to certain rifles, artillery guns, bulletproof jackets, missile destroyers, etc.

    Impact of the move

    • The items in the list are of proven technologies and do not involve any critical or cutting-edge technology for a next-generation weapon system or platform.
    • Little benefits for domestic players in short-run: Against each of these items are mentioned a year when import embargo would kick in, leading to apprehensions that demands will be placed with foreign vendors until then, leaving very little for domestic producers.
    • The biggest challenge for the government and the armed forces will be to keep this commitment to domestic producers in the event of an operational requirement.

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