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  • Goods and Services Tax (GST)

    What is the Controversy over GST levies on Food?

    25 July 2022 | Prelims Only | Economics
    Mains Paper 3: Indian Economy

    From July 18, a 5% Goods and Services Tax (GST) has been levied on several food items and grains that are sold in a pre-packed, labelled form even if they are not branded.

    What is the news?

    • So far, these items, which include curd, lassi, buttermilk, puffed rice, wheat, pulses, oats, maize and flour, were exempted from the GST net.
    • The fresh tax levies have attracted an outcry from traders as well as consumers.

    What is GST?

    • 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).
    • GST, being a consumption-based tax, resulted in loss of revenue for manufacturing-heavy states.

    What are GST Slabs?

    • In India, almost 500+ services and over 1300 products fall under the 4 major GST slabs.
    • There are five broad tax rates of zero, 5%, 12%, 18% and 28%, plus a cess levied over and above the 28% on some ‘sin’ goods.
    • The GST Council periodically revises the items under each slab rate to adjust them according to industry demands and market trends.
    • The updated structure ensures that the essential items fall under lower tax brackets, while luxury products and services entail higher GST rates.
    • The 28% rate is levied on demerit goods such as tobacco products, automobiles, and aerated drinks, along with an additional GST compensation cess.

    How did the rate hikes come about?

    • The 5% tax on unbranded packed food items was approved by the GST Council.
    • Some of the other items to have lost their tax-exempt status include bank cheques, maps and atlases, hotel rooms that cost up to ₹1,000 a night, and hospital room rents of over ₹5,000 a day.
    • The pre-packed items weighing over 25 kg would not attract GST.

    Why such move?

    • This move was part of a broader set of changes in the GST structure to do away with tax exemptions as well as concessional tax rates.
    • The Centre and States had discussed the need to raise revenues from the GST, which at the time of its launch five years ago, was premised on levying a ‘revenue-neutral’ rate of 15.5%.
    • All affected food items, including wheat, pulses, rice, curd and lassi, will be exempt from GST when sold loose.

    What has the government said on the issue?

    • FM has hit out at misconceptions about the GST levies on food items and dismissed suggestions that they were imposed unilaterally by the Centre.
    • The 5% levy, she said, was critical to curb tax leakages and was not taken by ‘one member’ of the GST Council alone as all States had agreed to the move.
    • When GST was rolled out, a GST rate of 5% was made applicable on branded cereals, pulses, flour.
    • This was later amended to tax only such items which were sold under a registered brand or brands on which enforceable right was not foregone by the suppliers.
    • This tax exemption triggered ‘rampant misuse’ by reputed manufacturers and brand owners leading to a gradual drop in revenues.

     

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  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    Monkeypox is ‘Public Health Emergency’

    25 July 2022 | Prelims Only | International Relations
    Mains Paper 2: Important International Institutions

    The World Health Organization’s Director-General has declared monkeypox a public health emergency of international concern (PHEIC) July 23, 2022.

    What is PHEIC?

    Definition: Under the International Health Regulations (IHR), a public health emergency is defined as “an extraordinary event which is determined, as provided in these Regulations: to constitute a public health risk to other States through the international spread of disease; and to potentially require a coordinated international response”.

    What criteria does the WHO follow to declare PHEIC?

    • PHEIC is declared in the event of some “serious public health events” that may endanger international public health.
    • The responsibility of declaring an event as an emergency lies with the Director-General of the WHO and requires the convening of a committee of members.

    Implications of a PHEIC being declared

    The PHEIC is the highest level of alert the global health body can issue.

    • There are some implications of declaring a PHEIC for the host country.
    • Only polio and SARS-CoV-2 were ongoing PHEIC prior to monkeypox.
    • Declaring a PHEIC may lead to restrictions on travel and trade.

    Back2Basics: Monkeypox

    • The monkeypox virus is an orthopoxvirus, which is a genus of viruses that also includes the variola virus, which causes smallpox, and vaccinia virus, which was used in the smallpox vaccine.
    • It causes symptoms similar to smallpox, although they are less severe.
    • While vaccination eradicated smallpox worldwide in 1980, monkeypox continues to occur in a swathe of countries in Central and West Africa, and has on occasion showed up elsewhere.
    • According to the WHO, two distinct clade are identified: the West African clade and the Congo Basin clade, also known as the Central African clade.

     

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  • Modern Indian History-Events and Personalities

    [pib] Anushilan Samiti

    25 July 2022 | Prelims Only |
    Mains Paper 1: GS1-02.Modern Indian History- Mid-18th century – Present (significant events, personalities, issues);

    Union Education and Skill Development Minister has urged NCERT and the Education fraternity to include enough information about Anushilan Samiti, especially in the upcoming National Curriculum Framework

    Anushilan Samiti

    • Anushilan Samiti was an Indian fitness club, which was actually used as an underground society for anti-British revolutionaries.
    • It was founded by Satish Chandra Pramatha Mitra, Aurobindo Ghose and Sarala Devi.
    • In the first quarter of the 20th century it supported revolutionary violence as the means for ending British rule in India.
    • The organisation arose from a conglomeration of local youth groups and gyms (akhara) in Bengal in 1902.
    • It had two prominent, somewhat independent, arms in East and West Bengal, Dhaka Anushilan Samiti (centred in Dhaka), and the Jugantar group (centred in Calcutta).
    • It challenged British rule in India by engaging in militant nationalism, including bombings, assassinations, and politically motivated violence.

    Revolutionary activities

    • The Samiti collaborated with other revolutionary organisations in India and abroad.
    • It was led by the nationalists Aurobindo Ghosh and his brother Barindra Ghosh, influenced by philosophies like Italian Nationalism, and the Pan-Asianism of Kakuzo Okakura.
    • The Samiti was involved in a number of noted incidents of revolutionary attacks against British interests and administration in India, including early attempts to assassinate British Raj officials.
    • These were followed by the 1912 attempt on the life of the Viceroy of India, and the Seditious conspiracy during World War I, led by Rash Behari Bose and Jatindranath Mukherjee respectively.

    Defiance from militant nationalism

    • The organisation moved away from its philosophy of violence in the 1920s due to the influence of the Indian National Congress and the Gandhian non-violent movement.
    • A section of the group, notably those associated with Sachindranath Sanyal, remained active in the revolutionary movement, founding the Hindustan Republican Association in north India.
    • A number of Congress leaders from Bengal, especially Subhash Chandra Bose, were accused by the British Government of having links with the organisation during this time.
    • The Samiti’s violent and radical philosophy revived in the 1930s, when it was involved in the Kakori conspiracy, the Chittagong armoury raid, and other actions against the administration in British-occupied India.

    Other personalities associated with Anushilan Samiti

    • Legends like, Deshabandhu Chittaranjan Das, Surendranath Tagore, Jatindranath Banerjee, Bagha Jatin were associated with Anushilan Samiti.
    • Dr Hedgewar who established the Rashtriya Swayamsevak Sangh (RSS) was also an alumnus of the Samity.

     

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  • Wildlife Conservation Efforts

    Why is Karnataka opposing Centre’s draft Eco-Sensitive Area norms for Western Ghats?

    25 July 2022 | | Environment
    Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    The Union Environment Ministry’s latest draft notification on Ecologically Sensitive Areas (ESA) in the Western Ghats is facing stiff opposition in Karnataka.

    What is the news?

    • The MoEFCC had issued a draft notification that demarcated large parts of Karnataka, Tamil Nadu, Gujarat and Maharashtra as eco-sensitive areas.
    • Among these states, Karnataka contains the largest geographical share of the notified areas in the Western Ghats, at 20,668 sq km.

    ESA in Western Ghats

    • In 2013, the Kasturirangan committee had submitted a report which recommended that 37% of the Western Ghats, covering an area of 59,940 sq km be classified as ESA.
    • On the basis of this, several drafts were introduced which were subsequently rejected by the surrounding states, including Karnataka.

    What is ESA?

    • Eco-Sensitive Zones (ESZs) or Ecologically Fragile Areas (EFAs) are areas notified by the MoEFCC around Protected Areas, National Parks and Wildlife Sanctuaries.
    • The purpose of declaring ESZs is to create some kind of “shock absorbers” to the protected areas by regulating and managing the activities around such areas.
    • They also act as a transition zone from areas of high protection to areas involving lesser protection.

    How are they demarcated?

    • The Environment (Protection) Act, 1986 does NOT mention the word “Eco-Sensitive Zones”.
    • However, Section 3(2)(v) of the Act, says that Central Government can restrict areas in which any industries, operations or processes or class of industries, operations or processes shall be carried out or shall not, subject to certain safeguards.
    • Besides Rule 5(1) of the Environment (Protection) Rules, 1986 states that central government can prohibit or restrict the location of industries and carrying on certain operations or processes on the basis of certain considerations.
    • The same criteria have been used by the government to declare No Development Zones (NDZs).

    Defining its boundaries

    • An ESZ could go up to 10 kilometres around a protected area as provided in the Wildlife Conservation Strategy, 2002.
    • Moreover, in the case where sensitive corridors, connectivity and ecologically important patches, crucial for landscape linkage, are beyond 10 km width, these should be included in the ESZs.
    • Further, even in the context of a particular Protected Area, the distribution of an area of ESZ and the extent of regulation may not be uniform all around and it could be of variable width and extent.

    Activities Permitted and Prohibited

    • Permitted: Ongoing agricultural or horticultural practices, rainwater harvesting, organic farming, use of renewable energy sources, and adoption of green technology for all activities.
    • Prohibited: Commercial mining, saw mills, industries causing pollution (air, water, soil, noise etc.), the establishment of major hydroelectric projects (HEP), commercial use of wood, Tourism activities like hot-air balloons over the National Park, discharge of effluents or any solid waste or production of hazardous substances.
    • Under regulation: Felling of trees, the establishment of hotels and resorts, commercial use of natural water, erection of electrical cables, drastic change of agriculture system, e.g. adoption of heavy technology, pesticides etc, widening of roads.

    What does the new draft notification for the Western Ghats say?

    • The draft notification demarcates 46,832 sq km in the five states Gujarat, Maharashtra, Karnataka, Goa and Tamil Nadu as ESA in the Western Ghats.
    • Kerala is excluded from the draft notification and it had earlier undertaken the exercise of demarcating ESA in the state by physical verification.
    • Among the five states, 20,668 sq km of the ESA lies in Karnataka, 1,461 sq km in Goa, 17,340 sq km in Maharashtra, 6,914 sq km in Tamil Nadu and 449 sq km in Gujarat.
    • According to the notification, the concerned state governments are responsible for monitoring and enforcing the provisions of the notification.

    What are the curbs that the state governments will have to implement?

    • The draft notification states there shall be a complete ban on mining, quarrying and sand mining in the ESA.
    • All existing mines are to be phased out within five years from the date of issue of the final notification or on the expiry of the existing mining lease.
    • It also bars setting up of new thermal power projects and expansion of existing plants in the sensitive area, and the banning of all new ‘Red’ category industries.
    • The construction of new townships and area development projects will also be prohibited in the areas.
    • ‘Orange’ category industries, with a pollution index score of 41-59, such as jute processing and ‘White’ industries that are considered non-polluting will also be allowed with strict compliance.

    What were the suggestions by the Kasturirangan panel?

    • The panel, formed in 2012, was tasked with the mandate of taking a “holistic view of the issue, and to bring synergy”.
    • It aimed to protecting the environment and biodiversity, while maintaining the needs and aspirations of the local and indigenous people, of sustainable development and environmental integrity of the region.
    • The report had recommended a blanket ban on mining, quarrying, red category industries and thermal power projects.
    • It also stated that the impact study of infrastructural projects on the forest and wildlife should be conducted before permission is given.

    What is Karnataka’s stand on the matter?

    • The Karnataka government has been firm in rejecting the implementation of the guidelines.
    • It has staunchly opposed to the Kasturirangan committee report on Western Ghats.
    • It urged that declaring Western Ghats as ESA would adversely affect the livelihood of people in the region.
    • Environmental experts consider the state government’s decision to be disastrous for the biodiversity of the Western Ghats.

     

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Despite pressures, the Indian rupee’s remarkable resilience

    23 July 2022 | op-ed snap | Economics
    Mains Paper 3: Indian Economy

    Context

    The Indian rupee has depreciated by around 7% against the U.S. dollar, since the start of the year, in response to various domestic and global factors.

    What are the factors responsible for decline?

    • A widening current account deficit, persistent risk-off sentiment as a result of geopolitical tensions, ‘a strengthening dollar index, and continuous sell-off by foreign portfolio investors have all put pressure on the rupee’.
    • Reversal of monetary policy in the US: The runaway inflation levels since last year, which have seen consumer price index (CPI) inflation in the United States reaching a multi-decade high of 9.1% in June 2022, have prompted the reversal in the monetary policy stance of the US Federal Reserve.
    • With inflation rising unabated, the Fed is widely expected to continue raising interest rates.
    • Higher risk-free return in the US: As a result of higher risk-free returns being available in the U.S., there have been persistent outflows of foreign portfolio capital since October 2021, which, on a cumulative basis, stands at $30 billion this year.

    Comparison with the depreciation in the past

    • Even as the rupee has fallen sharply against the dollar, the depreciation has been relatively lower compared with past crises.
    • During the global financial crisis of 2008, the rupee had weakened by over 20% between December 2007-June 2009 and during the Taper Tantrum of 2013 for seven months from the start of the crisis in May 2013, the rupee had depreciated by over 11%.
    • Reduced external vulnerability: The relative lower depreciation this time is attributed to the lowering of India’s external vulnerability measured in terms of a relatively high import cover and low short-term external debt.
    • During the Taper Tantrum, India’s import cover stood at over seven months as compared to around 12 months in the current period.

    Decline in foreign exchange reserves

    • The Reserve Bank of India (RBI) has stepped in to arrest a large depreciation in the currency, with interventions in the spot and forward foreign exchange markets.
    • Consequently, India’s foreign exchange reserves have moderated by almost $55 billion from a high of $635 billion seen this year.
    • Elevated global crude oil prices have impinged on India’s oil import bill, in turn widening the trade deficit, thus increasing the demand for U.S. dollars, and affecting forex reserves further.

    Effects of weak rupee

    • Export to become competitive: Among the benefits is the premise that the rupee’s weakening should aid exporters in becoming more competitive.
    • However, the concomitant depreciation of currencies of some of India’s competitors such as South Korea, Malaysia and Bangladesh against the dollar, alongwith a high import intensity of some of its key export segments (petroleum, gems and jewellery and electronics), is likely to have blunted the ameliorative impact on India’s exports.
    • Increase in the price of imported commodities: a weaker rupee is driving up prices of key import commodities such as coal, oil, edible oil, gold, thus impacting the imported component of inflation.
    • Impact on the borrowers: The unhedged component of corporate debt denominated in dollars is also likely to bear the brunt of a weaker rupee.
    • Impact on investment: Most importantly, a continuously sliding exchange rate discourages foreign investors from making fresh investments, which keep losing value in dollar terms.
    • For this reason, it is ideal to provide confidence to investors by arresting a continuous slide in the exchange rate.

    Measure by the RBI to arrest the weakening of rupee

    • Apart from intervening in the forex market to arrest the fall in the rupee’s value, the RBI announced a slew of measures recently to liberalise foreign inflows into the country and make them more attractive.
    • Measures such include:
    • Promoting trade settlements between India and other countries in rupee terms.
    • Offering higher interest rates on fresh Foreign Currency Non-Resident (Bank) and Non-Resident External deposits.
    • A widening of investible universe of government and corporate debt, a relaxation of the interest rate.
    • Amount ceiling for External Commercial Borrowing loans, among others, have contributed to arresting the rupee’s slide against the greenback.

    Way forward

    • Inclusion of companies in glabal indices: The Government could encourage some of the large market cap companies (private and public sectors) to be included in the major global indices such as MSCI and FTSE.
    • This will help increase the weight of Indian equities in these indices, compensating for foreign portfolio outflows to some extent as investors are unlikely to be underweight on India.
    • India’s entry into bond indices: The Government could also expedite India’s entry into bond indices such as J.P. Morgan’s Emerging-Market Bond Index and Barclays Global Bond Index.
    • This will not only lead to forex inflows but also have a benign impact on interest rates.
    • Such measures will keep the forex war chest of the RBI at a comfortable level, providing the central bank the requisite ammunition in case there is further weakness.
    • The maintenance of the U.S.-India interest rate differential along with timely forex market interventions by the central bank to manage volatility will prove to be salutary in preserving the rupee value against the greenback.

    Conclusion

    Even as the rupee is expected to remain under pressure in the near term because of global uncertainty, high commodity prices and rising U.S. interest rates, mitigating measures have to be taken to partly arrest the slide.

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    Back2Basics: What is taper tantrum?

    • Taper tantrum refers to the 2013 collective reactionary panic that triggered a spike in U.S. Treasury yields, after investors learned that the Federal Reserve was slowly putting the breaks on its quantitative easing (QE) program.
    • The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
    • The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.

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  • Russian Invasion of Ukraine: Global Implications

    Russia, Ukraine seal grain exports deal

    23 July 2022 | | International Relations
    Mains Paper 2

    Kyiv and Moscow penned a landmark agreement with Turkey and the UN to unblock Ukraine’s Black Sea grain exports after a Russian blockade raised fears of a global food crisis.

    What is the deal about?

    • The deal was agreed through UN and Turkish mediation.
    • It establishes safe corridors along which Ukrainian ships can come in and out of three designated Black Sea ports in and around Odessa.
    • Both sides also pledged not to attack ships on the way in or out.

    Why such move?

    • It will bring relief for developing countries on the edge of bankruptcy and the most vulnerable people on the edge of famine.
    • The five-month war has already displaced millions and left thousands dead.
    • It is being fought across one of Europe’s most fertile regions by two of the world’s biggest grain producers.
    • Up to 25 million tonnes of wheat and other grain have been blocked in Ukrainian ports by Russian warships and landmines Kyiv has laid to avert a feared amphibious assault.

    Why was the grain export deal signed?

    • Ukraine is one of the world’s largest exporters of wheat, corn and sunflower oil, but Russia’s invasion of the country and naval blockade of its ports have halted shipments.
    • Some grain is being transported through Europe by rail, road and river, but the prices of vital commodities like wheat and barley have soared during the nearly five-month war.
    • Ukrainian and Russian military delegations reached a tentative agreement last week on a UN plan that would also allow Russia to export its grain and fertilizers.
    • Ukraine is expected to export 22 million tons of grain and other agricultural products that have been stuck in Black Sea ports due to the war.

    What is the grain export deal?

    • The deal makes provisions for the safe passage of ships.
    • It foresees the establishment of a control center in Istanbul, to be staffed by UN, Turkish, Russian and Ukrainian officials, to run and coordinate the process.
    • Ships would undergo inspections to ensure they are not carrying weapons.
    • Ukraine has insisted that no Russian ship would escort vessels and that there would be no Russian representative present at Ukrainian ports.
    • Ukraine also plans an immediate military response in case of provocations.

     

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  • Parliament – Sessions, Procedures, Motions, Committees etc

    What is a Private Member’s Bill?

    23 July 2022 | | Polity
    Mains Paper 2: Parliament & State Legislatures

    Opposition members protested against the introduction of a private member’s Bill on the repeal of The Places of Worship (Special Provisions) Act, 1991, in the Rajya Sabha.

    Private Member’s Bill

    • A private member’s Bill is different from a government Bill and is piloted by an MP who is not a minister. An MP who is not a minister is a private member.
    • Individual MPs may introduce private member’s Bill to draw the government’s attention to what they might see as issues requiring legislative intervention.

    Difference between private and government Bills

    • While both private members and ministers take part in the lawmaking process, Bills introduced by private members are referred to as private member’s Bills and those introduced by ministers are called government Bills.
    • Government Bills are backed by the government and also reflect its legislative agenda.
    • The admissibility of a Private Bill is decided by the Chairman in the case of the Rajya Sabha and the Speaker in the case of the Lok Sabha.
    • Before the Bill can be listed for introduction, the Member must give at least a month’s notice, for the House Secretariat to examine it for compliance with constitutional provisions and rules on legislation.
    • While a government Bill can be introduced and discussed on any day, a private member’s bill can only be introduced and discussed on Fridays.

    Has a private member’s bill ever become a law?

    • No private member’s Bill has been passed by Parliament since 1970.
    • To date, Parliament has passed 14 such Bills, six of them in 1956.
    • In the 14th Lok Sabha, of the over 300 private member’s Bills introduced, roughly four per cent were discussed, the remaining 96 per cent lapsed without a single dialogue.
    • The selection of Bills for discussion is done through a ballot.

    Back2Basics: Places of Worship Act, 1991

    • It was passed in 1991 by the P V Narasimha Rao-led government.
    • The law seeks to maintain the “religious character” of places of worship as it was in 1947 — except in the case of the Ram Janmabhoomi-Babri Masjid dispute, which was already in court.
    • The law was brought in at the peak of the Ram Mandir movement, exactly a year before the demolition of the Babri Masjid.
    • Introducing the law, then Home Minister S B Chavan said in Parliament that it was adopted to curb communal tension.

    What are its provisions?

    The objective of the law describes it as an Act to prohibit conversion of any place of worship.

    • It aims to provide for the maintenance of the religious character of any place of worship as it existed on the 15th day of August 1947, and for matters connected therewith or incidental thereto”.
    • Sections 3 and 4 of the Act declared that the religious character of a place of worship shall continue to be the same as it was on August 15, 1947.
    • No person shall convert any place of worship of any religious denomination into one of a different denomination or section.
    • Section 4(2) says that all suits, appeals or others regarding converting the character of a place of worship, that was pending on August 15, 1947, will stand abated when the Act commences and no fresh proceedings can be filed.
    • However, legal proceedings can be initiated after the commencement of the Act if the change of status took place after the cut-off date of August 15, 1947.

    What does it say about Ayodhya, and what else is exempted?

    • Act does not to apply to Ram Janma Bhumi Babri Masjid.

    Besides the Ayodhya dispute, the Act also exempted:

    • any place of worship that is an ancient and historical monument or an archaeological site, or is covered by the Ancient Monuments and Archaeological Sites and Remains Act, 1958;
    • a suit that has been finally settled or disposed of;
    • any dispute that has been settled by the parties or conversion of any place that took place by acquiescence before the Act commenced.

    What has the Supreme Court said about the Act?

    • In the 2019 Ayodhya verdict, the Constitution Bench led by former CJI Ranjan Gogoi referred to the law and said it manifests the secular values of the Constitution and strictly prohibits retrogression.
    • In providing a guarantee for the preservation of the religious character of places, Parliament determined that independence from colonial rule furnishes a constitutional basis for healing the injustices of the past.
    • The law addresses itself to the State as much as to every citizen of the nation. Its norms bind those who govern the affairs of the nation at every level.
    • Those norms implement the Fundamental Duties under Article 51A and are hence positive mandates to every citizen as well.

    Why is the law under challenge?

    • A politician has challenged the law on the ground that violates secularism.
    • He has also argued that the cut-off date of August 15, 1947, is “arbitrary, irrational and retrospective” and prohibits Hindus, Jains, Buddhists, and Sikhs from approaching courts to “reclaim” their places of worship.
    • Such places, he argued, were “invaded” and “encroached” upon by “fundamentalist barbaric invaders”.
    • The right-wing politicians have opposed the law even when it was introduced, arguing that the Centre has no power to legislate on “pilgrimages” or “burial grounds” which is under the state list.
    • Another criticism against the law is that the cut-off is the date of Independence, which means that the status quo determined by a colonial power is considered final.

     

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  • Goods and Services Tax (GST)

    What is Transition Tax Credit?

    23 July 2022 | Prelims Only | Economics
    Mains Paper 3: Indian Economy

    Taxpayers who had missed out on getting the benefit of transitional tax credits during India’s switchover to the Goods and Services Tax (GST) regime five years ago, will now get a fresh window to avail them.

    What is Transitional Tax Credit?

    • A tax credit is a component of a company’s tax payment that can be applied to offset a subsequent tax obligation.
    • When India moved to the GST regime in 2017, companies had to transition the credit sitting on their books.
    • So, the closing balance in the old tax regime would become the opening credit balance under GST.
    • When India moved from the old indirect tax regime to GST, a one-time transition of credit was allowed.
    • That is, companies could set off part of the taxes paid during the old tax regime against future GST liabilities.
    • Many companies claimed that they had simply forgotten to claim the transitional credit.

    Why in news?

    • The Supreme Court has directed the revenue authorities to facilitate such credits.
    • The move is likely to benefit hundreds of GST assessees who had hitherto not been able to avail such credits.
    • They will be given two-month window to claim during September and October.

     

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  • Modern Indian History-Events and Personalities

    Who were Raja Serfoji and Sivaji?

    23 July 2022 | Prelims Only |
    Mains Paper 1: GS1-02.Modern Indian History- Mid-18th century – Present (significant events, personalities, issues);

    A 19th-century painting of Raja Serfoji and his son Sivaji, which was stolen from Saraswathi Mahal, Thanjavur, a few years ago has been traced to the Peabody Essex Museum, Massachusetts, in the US.

    Who was Raja Serfoji?

    • For long, the rulers of Thanjavur had been devoid of absolute power.
    • Serfoji, placed by the British on the throne over his stepbrother Amar Singh, died in 1832.
    • His only son Sivaji ruled until 1855.
    • However, he had no male successor.
    • Thanjavur became a casualty of Lord Dalhousie’s infamous ‘Doctrine of Lapse’, and it got absorbed into British-ruled Indian provinces.
    • The painting, which has Raja Serfoji and his young son, according to some historians, was probably painted between 1822 and 1827 and kept in the Saraswathi Mahal.

    Back2Basics: Doctrine of Lapse

    • Between 1848 and 1856, Lord Dalhousie, the Governor-General of India, devised the Doctrine of Lapse as an annexation policy.
    • It was an idea to annex those states which have no heir.
    • They lose the right of ruling, and it will not be reverted by the adoption of a child.
    • It was one of the key components that added to the 1857 revolt.

    Features of the doctrine

    • Any princely state or any territory under the direct influence of the British, as a vassal state under the British Subsidiary System, would inevitably be annexed if the ruler was either “manifestly incompetent or died without a direct heir”.
    • It ousted the age-old right of an Indian ruler without an heir to select a successor.
    • Additionally, the British decided whether potential rulers were competent enough or not.

    Annexations made under this policy

    Annexation           Year

    Satara                1848

    Jaitpur                1849

    Sambalpur            1849

    Baghat               1850

    Udaipur              1852

    Jhansi                 1853

    Nagpur               1854

     

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  • Foreign Policy Watch: India-Sri Lanka

    ‘Advantage New Delhi’ in Sri Lanka’s India lifeline

    22 July 2022 | op-ed snap | International Relations
    Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    Ranil Wickremesinghe’s election as the President of Sri Lanka in a crucial Parliament vote on July 20, 2022, gives India an opportunity to take the lead in the foreign aid game in its neighbourhood.

    Background of the crisis in Sri Lanka

    • Sri Lanka has been facing economic turbulence since its pre-emptive default on its foreign debt obligations in mid-April this year.
    • Following the debt default and a shortage of dollars, the Sri Lankan economy is experiencing stagflation.
    •  Inflation has spiralled to over 50%, translating into higher food and fuel prices.
    •  Sri Lanka’s worst economic crisis since its independence in 1948 is due to a tepid recovery from the COVID-19 pandemic, the Russia-Ukraine conflict shock and economic mismanagement under the administration of the Rajapaksas.
    • Sri Lanka is also facing challenges in getting foreign aid, as 60% of the world’s poorest countries are also experiencing debt distress.

    Opportunities for India

    •  In the first six months of 2022, Indian aid worth $3.8 billion has flowed to Sri Lanka through loans, swaps and grants.
    • This is India’s largest bilateral aid programme in recent times.
    •  Stabilising Sri Lanka’s economy could prove to be a major win for Indian’s ‘neighbourhood-first’ policy.
    • Moreover, once the Sri Lankan economy stabilises, India can deepen its trade and investment linkages with Sri Lanka, transcending the current humanitarian aid relationship.
    • On the other hand, an unstable Sri Lankan economy could pose security risks to India and lead to a flood of refugees across the Palk Strait.
    • This is an opportunity for India to strengthen bilateral and regional partnerships.
    • Countering Chinese influence: In recent years, China has emerged as a major partner for Sri Lanka, especially for infrastructure projects, many of which are under scrutiny now.
    • This provides an opportunity for India to upscale its aid and cement its first mover advantage over China by leading an aid consortium for Sri Lanka, working closely with other friendly countries such as the United States, Japan and the European Union as well as the International Monetary Fund (IMF).

    Why China is reluctant to help?

    • China worries that unilaterally restructuring Sri Lanka’s debt or giving it moratoria would set a new precedent in its lending practices, leading to a queue of similarly distressed countries seeking debt relief from Beijing.
    • Furthermore, China, which is a G2 economy, and wanting to challenge the U.S., does not want its reputation to be tarnished by bailing out a floundering economy.

    Steps Sri Lanka needs to take

    • Concluding the talks with Sri Lanka: The government must show that it is serious about stabilising the economy by concluding talks on an IMF programme which will increase taxes and utility prices to raise revenue and increase interest rates to control inflation.
    • Economic reforms: It has to implement structural reforms to make the economy more open to trade and investment and allow market forces to determine resource allocation.
    • National consensus on IMF program: It has to build national consensus on implementing the IMF programme and reforms by explaining that this is the only solution to the crisis.
    • Anti-corruption policies: It has to restore the rule of law and enforce strong anti-corruption policies (including asset declarations for all parliamentarians and a strong anti-corruption office supported by the United Nations).
    • Reset foreign policy: It has to reset foreign policy towards a more neutral direction.

    Conclusion

    With political will and the right set of policies, Sri Lanka stands a sporting chance of achieving some economic normalcy within the next three years. India stands to gain by supporting Sri Lanka in its hour of need. A friend in need is a friend indeed.

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