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Subject: Economics

  • Is India finally entering stage II of its nuclear programme?

    In the news

    PM Modi marked a historic moment in India’s nuclear power journey by overseeing the commencement of core-loading at the indigenous Prototype Fast Breeder Reactor (PFBR) situated in Kalpakkam, Tamil Nadu. This event signifies a significant stride forward in India’s ambitious nuclear power program, heralding the onset of stage II.

    Context:

    • As of 2024, nuclear power contributes to around 3.11% of India’s total power generation.
    • Nuclear power remains the fifth-largest source of electricity in India, following coal, gas, hydroelectricity, and wind power.

    History of India’s Nuclear Power Program

    India’s journey in nuclear technology dates back to its independence in 1947. Here is a brief history of India’s Nuclear Power Program:

    1. 1948: India established the Atomic Energy Commission (AEC), marking its entry into the nuclear age.
    2. 1950s: Homi Bhabha, the founding director of India’s nuclear program, formulated the three-stage nuclear power program to establish a self-sufficient nuclear power industry.
    3. 1969: The first Pressurized Heavy Water Reactor (PHWR), the 40 MW Tarapur Atomic Power Station, was commissioned, marking the operationalization of Stage 1 of the nuclear power program.
    4. 1974: India conducted its first nuclear test, Pokhran-I, demonstrating its nuclear capabilities.
    5. Late 1970s – Early 1980s: India embarked on developing fast breeder reactors (FBRs) as part of Stage 2 of its nuclear program to enhance fuel efficiency and self-sufficiency.
    6. 1990s – 2000s: India focused on building a nuclear arsenal and delivery systems capable of military deployment after conducting further nuclear tests in 1998.
    7. Present: India possesses both nuclear weapons and an extensive nuclear fuel cycle capability, with ongoing developments in thorium-based reactors as part of Stage 3 of its nuclear power program.

    About India’s 3-stage Nuclear Power Program

    Description Timeline
    Stage 1 Relies on pressurized heavy water reactors (PHWRs) using natural uranium as fuel. Initiated in the 1950s;

    Operational since the 1960s
    Stage 2 Focuses on developing fast breeder reactors (FBRs) using plutonium-239 produced in Stage 1. Initiated in the 1970s;

    Development phase
    Stage 3 Involves the development of thorium-based reactors utilizing India’s significant thorium reserves. Initiated in the late 1980s/early 1990s;

    Research & Development phase

     

    Do you know?

    • The two principal natural isotopes are uranium-235 (which comprises 0.7% of natural uranium), which is fissile, and uranium-238 (99.3% of natural uranium), which is fissionable by fast neutrons and is fertile, meaning that it becomes fissile after absorbing one neutron.
    • All uranium isotopes are radioactive. U-239 is much more so than the far more common U-238 though, its half-life is about 23 minutes compared to four billion years! U-239 soon undergoes beta decay to Np-239.
    • Plutonium is created from uranium in nuclear reactors. Plutonium-239 is used to make nuclear weapons. Pu-239 and Pu-240 are byproducts of nuclear reactor operations and nuclear bomb explosions.

    What is Prototype Fast Breeder Reactor (PFBR)?

    • The PFBR is a machine that produces more nuclear fuel than it consumes. Its core-loading event is being hailed as a “milestone” because the operationalization of the PFBR will mark the start of stage II of India’s three-stage nuclear power program.
      • Previously, India used Pressurised Heavy Water Reactors (PHWRs) and Natural Uranium-238 (U-238), which contain minuscule amounts of U-235, as the fissile material.
    • It’s working:
      • Basically, in the process of Nuclear Fission, the nucleus of an atom absorbs a neutron, destabilizes, and breaks into two while releasing some energy. If the destabilized nucleus releases more neutrons, the reactor’s facilities will attempt to use them to instigate more fission reactions.
      • However, the heavy water in PHWR, the water molecules containing the deuterium isotope of hydrogen – slows neutrons released by one fission reaction enough to be captured by other U-238 and U-235 nuclei and cause new fission.
        • This heavy water is then pressurized to keep it from boiling to produce plutonium-239 (Pu-239) and energy.
    • Significance of using PFBR:
      • Only U-235, not U-238, can sustain a chain reaction but it is consumed fully in stage I. In stage II, India will use Pu-239 together with U-238 in the PFBR to produce energy, U-233, and more Pu-239.
      • Liquid sodium serves as the primary coolant, facilitating heat transfer and electricity generation through secondary circuits.

    Why was the PFBR delayed?

    • Prolonged delays: The PFBR project encountered prolonged delays and cost overruns, attributed to technical complexities and logistical hurdles. Sanctions imposed against India following the ‘Smiling Buddha’ nuclear test in 1974 disrupted the project, necessitating alterations in fuel type and operational parameters.
    • Lack of Resources:
      • The retirement of experienced personnel involved in the project, coupled with delays in decision-making processes, contributed to project setbacks.
      • Escalating costs, reaching ₹6,800 crore by 2019, underscored the financial strain and administrative shortcomings plaguing the project.
    • Procurement Issues: Audit reports revealed procurement inefficiencies, with delays averaging 158 days per order, exacerbating project timelines and costs.
    • Regulatory Imperatives: Addressing concerns over safety and regulatory oversight remains imperative to ensure public confidence and operational integrity.

    Way Forward and Future Prospects:

    • Usage of Small Modular Reactors (SMRs): SMR designs have a maximum capacity of 300 MW, require less land, and accommodate more safety features. Several countries are developing SMRs to complement conventional [facilities] since SMRs can be installed at reduced cost and time by repurposing.
    • Stage II Expansion: The PFBR’s 500 MWe capacity sets the stage for future FBR projects, aligning with India’s energy diversification goals and decarbonization initiatives. Today nuclear power has a new lease of life thanks to the pressure on India to decarbonise, reduce its import of fossil fuels, and give its renewables sector some breathing space.
      • In 2019, the DAE proposed building 4 more fast breeder reactors (FBRs) of 600 MWe capacity each – 2 in Kalpakkam in 2021 and two in 2025, with sites to be selected.

    Conclusion

    • As India navigates the complexities of nuclear power development, the PFBR stands as a testament to technological prowess and strategic foresight.
    • While challenges persist, the trajectory of stage II underscores India’s commitment to leveraging nuclear energy for sustainable development and energy security.
    • With continued innovation and regulatory reform, India is poised to realize its vision of a robust and self-reliant nuclear energy ecosystem.

    Try this Question from CSE Mains 2018:

    Q. With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy. (250 Words, 15 Marks)

  • Recently awarded GI Tags

    gi tag

    In the news

    • In the past week, many Geographical Indications (GI) Tags were awarded across the states of India.

    About GI Tag

    • A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Nodal Agency: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
    • India, as a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 w.e.f. September 2003.
    • GIs have been defined under Article 22 (1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
    • The tag stands valid for 10 years.

    Recently Awarded GI Tags

    [1] Narasapur Crochet Lace Craft:

    Details
    Technique Handcrafted crochet lace-making using fine threads
    Design Intricate patterns and motifs inspired by nature and traditional motifs
    Uniqueness Known for delicate and intricate designs, used in sarees, dress materials, and home decor
    Economic Impact Provides livelihood to local artisans, enhances market value, protects against imitation
    Recognition GI tag promotes cultural heritage, supports economic empowerment of artisans

     

    [2] Mukha Shilpa of Majuli:

    Details
    Origin Majuli, Assam, the world’s largest river island
    Artform Traditional mask-making, also known as Mukha Shilpa
    Material Made from eco-friendly materials like bamboo, clay, and cloth
    Uniqueness Masks depict mythological characters, deities, and animals, preserving Assamese culture
    Cultural Significance Used in traditional Sattriya dance forms, rituals, and festivals
    Economic Impact GI tag promotes tourism, empowers local artisans, supports conservation efforts
    Conservation Efforts Recognition boosts efforts to preserve and promote this ancient art form

     

    [3] Traditional Tribal Attire ‘Risa’:

    Details
    Origin Tripura, northeastern state known for rich tribal culture
    Attire Traditional attire worn by Tripuri tribal women
    Fabric Handwoven cotton fabric with vibrant colors and intricate designs
    Uniqueness Unique weaving techniques and motifs representing tribal identity
    Cultural Heritage Integral part of Tripuri culture, worn during festivals and ceremonies
    Economic Impact GI tag enhances market visibility, supports livelihoods of weavers
    Preservation Efforts Recognition promotes preservation and revival of traditional weaving techniques

     

    [4] Riyawan Garlic (Madhya Pradesh):

    Details
    Origin Riyawan village in Ratlam district, Madhya Pradesh
    Variety Special type of garlic known for unique taste, aroma, and medicinal properties
    Cultivation Grown organically in fertile soil and favorable climate
    Uniqueness Distinct flavor and pungency, popular in culinary uses and Ayurvedic medicine
    Health Benefits Rich in antioxidants, believed to have medicinal properties for various ailments
    Economic Impact GI tag boosts local agriculture, provides economic opportunities to farmers
    Quality Assurance Recognition ensures authenticity and quality, protects against imitation

     

    [5] ‘Chandi Tarakasi’ or Silver Filigree:

    Details
    Origin Cuttack, Odisha, renowned for centuries-old silver filigree craftsmanship
    Craftsmanship Intricate art of twisting and curling thin silver wires to create delicate patterns and designs
    Utility Used in jewelry, utensils, decorative items, and souvenirs
    Uniqueness Unique designs reflecting Odia culture and heritage, passed down through generations
    Artistic Value Prized for craftsmanship and artistic appeal
    Economic Impact GI tag enhances market value, supports local artisans, promotes preservation of cultural heritage
    Cultural Heritage Recognition promotes preservation and continuation of traditional art form

     

    Try this PYQ from CSE Prelims 2018:

    Q.India enacted The Geographical Indications of Goods (Registration and Protection) Act, 1999 in order to comply with the obligations to-

    (a) ILO

    (b) IMF

    (c) UNCTAD

    (d) WTO

     

    [wpdiscuz-feedback id=”2u8zuekcwj” question=”Please leave a feedback on this” opened=”1″]Post your responses here.[/wpdiscuz-feedback]

  • Chakshu Platform launched against Spam Calls

    In the news

    • The Department of Telecommunications (DoT) introduced Chakshu, a new platform aimed at enabling telecom users to report fraud or spam callers.

    Chakshu Platform

    • Chakshu (meaning eyes), accessible at sancharsaathi.gov.in/sfc, empowers citizens to proactively report suspicious communications, as announced by the DoT.
    • The government will collaborate with private firms like Truecaller to improve the functionality of the platform.
    • The Telecom Regulatory Authority of India (TRAI) is also working on building an app for the ‘Chakshu’ platform.

    Features of the platform

    • Reporting Options: Users can report various types of frauds, including those related to bank accounts, payment wallets, SIM cards, gas and electricity connections, KYC updates, impersonation, and sextortion.
    • Enhanced Reporting Mechanism: Chakshu offers a comprehensive mechanism for reporting fraudulent activities, ensuring that telecom users can address a wide range of concerns.

  • NUCFDC: Umbrella Body for Urban Co-op Banks established

    In the news

    • The Union Home Minister and Minister of Cooperation officially inaugurated the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC), marking a significant milestone in the development of urban cooperative banking.

    About NUCFDC

    • Regulatory Approval: NUCFDC has obtained approval from the RBI, authorizing it to function as a Non-Banking Finance Company (NBFC) and serve as the apex body for the urban cooperative banking sector.
    • Self-Regulatory Status: Additionally, NUCFDC has been granted the status of a Self-Regulatory Organisation (SRO) for the sector, empowering it to oversee and regulate various aspects of urban cooperative banking operations.
    • Capital Enhancement: NUCFDC aims to augment its capital base, with ambitions to achieve a capitalization level of Rs. 300 crores, facilitating its mission to support and strengthen Urban Cooperative Banks (UCBs).

    Functions of NUCFDC

    • Utilization of Funds: The organization intends to deploy its capital resources towards bolstering the financial capabilities of UCBs, including the development of a shared technology infrastructure to enhance service delivery and reduce operational costs.
    • Comprehensive Support: Apart from providing financial liquidity and capital assistance, NUCFDC will establish a collaborative technology platform accessible to all UCBs, enabling them to expand their service offerings efficiently and affordably.
    • Advisory Services: NUCFDC will also extend advisory and consultancy services to UCBs, assisting them in areas such as fund management, regulatory compliance, and strategic planning.

    About Urban Cooperative Banks (UCBs)

    • Origins: UCBs trace their roots to cooperative credit societies, offering financial services to members within specific community groups.
    • Regulations: Regulated by the RBI under the Banking Regulation Act of 1949, UCBs adhere to stringent prudential norms and guidelines to ensure financial stability.
    • Operational Classification: UCBs are categorized into urban and rural cooperative banks based on their geographic scope. They operate under the governance of State Registrars of Cooperative Societies (RCS) or the Central Registrar of Cooperative Societies (CRCS) and the RBI.
    • Historical Evolution: The journey of UCBs dates back to the establishment of the first Cooperative Credit Society of Haryana in 1904, evolving over time with regulatory amendments and institutional reforms.

    Reforming the UCBs

    • Narasimham Committee Report (1998): It suggest subsequent regulatory interventions aimed at enhancing the governance, capitalization, and operational efficiency of UCBs.
    • Structural Recommendations Committee (2021): The formation of a 4-tier structure for UCBs, proposed by a committee appointed by the RBI in 2021, seeks to streamline their operations and ensure effective regulatory oversight based on deposit size tiers:
    1. Tier 1 with all unit UCBs and salary earner’s UCBs (irrespective of deposit size) and all other UCBs having deposits up to Rs 100 crore.
    2. Tier 2 with UCBs of deposits between Rs 100 crore and Rs 1,000 crore,
    3. Tier 3 with UCBs of deposits between Rs 1,000 crore and Rs 10,000 crore, and
    4. Tier 4 with UCBs of deposits more than Rs 10,000 crore.

    Challenges Faced by UCBs

    • Capital Constraints: UCBs encounter limitations in capital mobilization due to regulatory restrictions on dividend payouts and limited avenues for raising external funds.
    • Diversification Hurdles: The lack of operational diversification and dependence on member contributions for capital infusion pose challenges to UCBs’ financial resilience and expansion prospects.
    • Funding Alternatives: Access to alternative funding sources remains constrained for UCBs, necessitating innovative approaches to address liquidity requirements.
    • Profit Distribution Dynamics: Incentives for profit distribution are subdued in UCBs, impacting their attractiveness to investors and hindering their growth trajectory.
    • Solvency Pressures: Expansion initiatives and acquisitions can strain UCBs’ solvency and liquidity positions, necessitating prudent risk management practices and strategic planning.

    Try this PYQ from CSP 2021:

    With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

    1. They are supervised and regulated by local boards set up by the State Governments.
    2. They can issue equity shares and preference shares.
    3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

    Which of the statements given above is/are correct?

    (a) 1 only
    (b) 2 and 3 only
    (c) 1 and 3 only
    (d) 1, 2 and 3

    [wpdiscuz-feedback id=”vge2nqi6bd” question=”Please leave a feedback on this” opened=”1″]Post your responses here.[/wpdiscuz-feedback]

  • NDSA expert panel to examine Kaleshwaram Project

    Kaleshwaram Project

    In the news

    • The Kaleshwaram Lift Irrigation Project (KLIP) has been under scrutiny following concerns over the sinking of piers at the Medigadda barrage.
    • To address these issues, National Dam Safety Authority (NDSA) will conduct a thorough examination of the project.

    What is Kaleshwaram Project?

    Details
    Location Kaleshwaram village, Telangana, India

    Earlier called as Pranahita-Chevella Lift Irrigation Project
    Confluence Point Pranhita-Godavari River confluence
    Project Size Claimed to be the world’s largest multi-stage and multi-purpose lift irrigation project
    Key Features Series of underground and surface water pumping stations, stretching over 300 km
    Purpose Supply water to 45 lakh acres in Telangana
    Commencement Started in 2016, utilizing approximately 283 TMC of water from the Godavari River
    Components Divided into 7 links and 28 packages through 13 districts

    Aims to source a total of 240 TMC of water

    Construction of barrage at Medigadda, with water reverse-pumped into the Godavari River
    Major Pumping Facilities Ramadugu (largest), Medaram, Annaram, and Sundilla

     

     

    About Godavari River

     

    • The Godavari River, also known as Dakshin Ganga, is the largest peninsular river system in the region.
    • Its basin is bordered by the Satmala hills to the north, the Ajanta range and Mahadeo hills to the south, the Eastern Ghats to the east, and the Western Ghats to the west.
    • Originating from Trimbakeshwar near Nasik in Maharashtra, the Godavari River flows for approximately 1465 km before reaching the Bay of Bengal.
    • The Godavari basin spans across Maharashtra, Telangana, Andhra Pradesh, Chhattisgarh, and Odisha, with smaller portions in Madhya Pradesh, Karnataka, and the UT of Puducherry.
    • Right bank tributaries include the Pravara, Manjira, and Maner.
    • Left bank tributaries comprise the Purna, Pranhita, Indravati, and Sabari rivers.

     

    About National Dam Safety Authority (NDSA): Ensuring Dam Safety in India

    The NDSA plays a crucial role in maintaining the safety standards of dams across the country.

    • Constitutional Basis: Although water management falls under the State List, the Union government has the authority to enact laws related to dam safety under Article 246 of the Constitution. (Parliament holds the power to make laws for any part of India not included within a State, irrespective of whether the subject falls under the State List.)
    • Dam Safety Act, 2021: Parliament has passed the Dam Safety Act to establish an institutional mechanism for ensuring dam safety in India.

    Objectives and Functions

    • Institutional Mechanism: The NDSA is tasked with maintaining standards for dam safety, preventing dam-related disasters, and addressing interstate concerns regarding dams.
    • Leadership Structure: The authority is headed by a chairman and supported by five members with expertise in various domains, including policy and research, technical aspects, regulation, disaster management, resilience, and administration and finance.
    • Surveillance and Inspection: Special provisions are in place for the surveillance, inspection, operation, and maintenance of all large dams in the country to prevent dam failure-related disasters.
    • Penal Provisions: The Dam Safety Act includes penal provisions and a list of offenses along with corresponding penalties to ensure compliance.

    Organizational Setup

    • Headquarters: The headquarters of the NDSA is located in the National Capital Region (NCR).
    • Regional Offices: The authority is supported by four regional offices strategically positioned across the country to facilitate efficient oversight and management of dam safety.

    Try this PYQ from CSP 2015:

    Q.Consider the following rivers:

    1. Vamsadhara
    2. Indravati
    3. Pranahita
    4. Pennar

    Which of the rivers given above are the tributaries of Godavari?

    (a) 1, 2 and 3

    (b) 2, 3 and 4

    (c) 1, 2 and 4

    (d) 2 and 3 only

    [wpdiscuz-feedback id=”hdrmke4wcn” question=”Please leave a feedback on this” opened=”1″]Post your responses here.[/wpdiscuz-feedback]

    Also Read:

    [Sansad TV] Perspective: Concerns over Dam Safety

  • Under-Sea Cable Disruptions expose key Telecom Vulnerability

    In the news

    • Three undersea cables connecting India to global telecom networks—Asia-Africa-Europe-1, Europe India Gateway, and Tata Global Network—have been damaged in the Red Sea Conflict, possibly due to targeted attacks.

    What are Submarine Communications Cable?

    • Submarine cables are laid on the seabed between land-based stations to transmit telecommunication signals across stretches of ocean and sea.
    • These cables employ fiber-optic technology, with optical fiber elements coated with protective layers suitable for the marine environment.
    • Submarine cables offer a reliable, cost-efficient, and high-capacity means of internet connectivity compared to satellites.

    India’s Submarine Cable Infrastructure

    • With 17 submarine cables landing in 14 cable landing stations, mainly in Mumbai and Chennai, India is actively expanding its undersea connectivity.
    • The Telecom Regulatory Authority of India (TRAI) has introduced regulations categorizing Cable Landing Stations (CLS) into Main CLS and CLS Point of Presence to enhance data flow and reduce reliance on foreign providers.
    • TRAI’s recommendations also include recognizing submarine cable operations as critical services, proposing legislative amendments, and suggesting exemptions from custom duty and GST for essential goods.
    • Examples:
    1. MIST Submarine Cable System (connecting India with Myanmar, Thailand, Malaysia, and Singapore)
    2. Reliance Jio Infocomm’s India Asia Xpress (IAX) (India to the Maldives, Singapore, Sri Lanka, and Thailand)
    3. India Europe Xpress (IEX) (India to Italy via Saudi Arabia and Greece)
    4. SeaMeWe-6 project (Singapore to France via India, Bangladesh, and Maldives)
    5. Africa2 Cable (connecting India with the UK via several African countries)

    Vulnerabilities in Telecom Infrastructure

    • Ongoing Conflict’s Impact: Damage to undersea cable systems in the Red Sea due to regional conflict exposes vulnerabilities in India’s internet and overseas telecom connectivity.
    • Limited Connectivity: India’s relatively few connections to such cables and regulatory restrictions on expanding the submarine cable industry pose significant concerns.
    • Choke Points: Cable disruptions underscore a choke point in subsea connections between Europe and Asia, particularly concerning for India due to limited connections and regulatory constraints.

    Current Challenges in Submarine Cable Infrastructure

    • Capacity Shortages: Rising demand from data centers, retail usage, and enterprise applications exacerbates capacity constraints in India’s submarine cable networks.
    • Opaque Ownership Structures: Lack of transparency in ownership of submarine cable systems raises national security concerns, particularly regarding the involvement of International Long Distance Operators (ILDOs).
    • Regulatory Constraints: Stringent regulations impede investment in submarine cable infrastructure, limiting redundancy and hindering security measures.

    Implications of TRAI Proposals

    • Digital Transformation: TRAI’s recommendations align with India’s digital ambitions, facilitating the expansion of data centers and enhancing internet connectivity.
    • Balancing Act: DoT’s decision on TRAI’s proposals will shape the future of India’s submarine cable industry, balancing the interests of stakeholders and national security concerns.

    Case Study: Australia’s Cable Protection Zone Regime

     

    • Legislative Framework: ACPZs established within its Exclusive Economic Zone (EEZ), offer a legislative model for protecting international submarine cables.
    • Regulatory Authority: The Australian Communications and Media Authority (ACMA) oversees the enforcement of protection measures within designated zones, ensuring compliance with stringent regulations.
    • Prohibited Activities: It restricts activities such as seabed trawling, vessel anchoring, and dredging within Cable Protection Zones, mitigating the risk of cable damage.

    Way Forward

    [A] Replicating Success in Indian Waters

    • Adopting Legislative Framework: India can collaborate with Australia to enact similar laws within its territorial waters, leveraging sovereign rights over submarine cables within the EEZ.
    • Establishing Protection Zones: Creation of Submarine Cable Protection Zones, consistent with UNCLOS provisions, enables India to enforce jurisdictional and physical safeguards.
    • Regional Cooperation: India can advocate for the adoption of Australia’s model legislation across the Indian Ocean Rim Association, fostering multilateral cooperation in protecting subsea infrastructure.

    [B] Operational Implementation and Collaboration

    • Coordination Mechanisms: Collaboration among navies and coastguards of Quad nations and like-minded countries facilitates operational coordination in monitoring and protecting high-density cable zones.
    • Policy Alignment: Aligning domestic legislative frameworks with regional initiatives ensures seamless coordination and collective action in safeguarding submarine assets.
    • Reducing Risks: Enhanced cooperation minimizes the risk of cable damage and sabotage, bolstering connectivity and resilience in the Indian Ocean Region.

    Conclusion

    • India stands at a pivotal juncture in safeguarding its subsea infrastructure amidst evolving geopolitical dynamics.
    • India must fortify its submarine cable assets, ensuring uninterrupted connectivity and advancing its digital aspirations.
    • Through proactive legislative measures and strategic collaboration, India can mitigate risks and emerge as a global leader in subsea infrastructure protection.

  • Analysis of Centre’s Capital Expenditure and Fiscal Deficit

    deficit

    In the news

    • Capital Expenditure Decline: In January, the Centre’s capital expenditure saw a significant decline of 40.5%, totaling ₹47,600 crore compared to ₹80,000 crore in the previous year.
    • Fiscal Deficit Widening: By the end of January, the fiscal deficit reached 64% of the revised estimates for 2023-24. Despite challenges in expenditure, the government seems poised to meet the revised deficit target of 5.8% of GDP for the year.

    What is Fiscal Deficit?

    • Definition: Fiscal deficit is the excess of total disbursements from the Consolidated Fund of India over total receipts, excluding debt repayment, within a financial year.
    • Formula: Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts).

    Government Income

    • Revenue receipts: This includes tax revenues collected by the government from various sources such as income tax, corporate tax, and indirect taxes like GST.
    • Capital receipts: This encompasses borrowings, disinvestments, and other sources of income.
    • Tax revenues: Income from GST and other taxes.
    • Non-tax revenues: Including interest receipts, dividends and profits, external grants, and receipts from union territories.
    • Other non-tax revenues: Revenue from fiscal, social, and economic services.

    Government Expenditure

    • Revenue Expenditure: Spending on day-to-day operations including salaries, subsidies, and interest payments.
    • Capital Expenditure: Investment in infrastructure, acquisition of assets, and long-term projects.
    • Interest Payments: Amount paid by the government as interest on its borrowings.
    • Grants-in-aid for the creation of capital assets: Funds provided for the creation of capital assets such as roads, bridges, and public buildings.

    Reasons behind Fiscal Deficit

    [1] Fall in Income

    • Lower tax collection: Economic slowdown, tax evasion, and GST implementation issues.
    • Impact of economic sectors shut during the pandemic: Closure of economic activities leading to decreased tax revenues.
    • Government’s missed disinvestment targets: Failure to achieve disinvestment targets resulting in lower capital receipts.

    [2] Rise in Expenditure

    • Factors contributing to high inflation: High inflation rates increasing import and borrowing costs.
    • Importance of social infrastructure investment: Emphasis on social infrastructure for inclusive growth and employment.
    • External market volatilities affecting Indian expenditure: Dependency on imports exposing India to external market fluctuations.
    • Unproductive expenditures like subsidies: Essential but unproductive expenditures adding to fiscal pressure.

    [3] Rise in Borrowings

    • Need for market borrowing for policy implementations: Borrowing for policy measures such as bank recapitalization, farm loan waivers, and UDAY.

    Implications of Fiscal Deficit

    • Vicious circle of borrowing and repayment: Continuous borrowing to repay loans leading to a debt trap.
    • Inflation: Increased borrowing leading to higher interest rates and inflation.
    • Reduced private sector borrowing: Government borrowing reducing borrowing opportunities for the private sector.
    • Discouragement of private investment: Inflation and limited financing discouraging private investment.
    • Risk of credit rating downgrade: High borrowing increasing the risk of credit rating downgrade.
    • Limits Revenue Spending: Rising fiscal deficit affecting government allowances like dearness allowance and dearness relief.
    • Foreign Dependence: Borrowing from foreign sources increasing dependence and exposure to external fiscal policies.

    Measures for Control: FRBM Act, 2003

    • The FRBM Act aims to instil fiscal discipline and ensure inter-generational equity in fiscal management, promoting long-term macro-economic stability.
    • Targets:
      1. Limit fiscal deficit to 3% of GDP by March 31, 2009.
      2. Completely eliminate revenue deficit.
      3. Reduce liabilities to 50% of estimated GDP by 2011.
      4. Prohibit direct borrowing from RBI to monetize the deficit.
    • Escape Clause: Section 4(2) of the Act allows the Centre to exceed annual fiscal deficit targets under specific circumstances, such as national security, calamity, agricultural collapse, or structural reforms.
    • Review Committee: In May 2016, a committee under NK Singh was formed to review the FRBM Act. Recommendations included targeting a fiscal deficit of 3% of GDP until March 31, 2020, reducing it to 2.8% in 2020-21, and further to 2.5% by 2023.
    • Current Targets:
      1. The latest provisions of the FRBM Act mandate limiting fiscal deficit to 3% of GDP by March 31, 2021.
      2. Central government debt should not exceed 40% of GDP by 2024-25, among other stipulations.

  • GST collections up 12.54% in February 2024

    gst

    In the news

    • India’s GST revenues saw a robust growth of 12.54% in February, exceeding ₹1.68 lakh crore.
    • This marked the fourth-highest monthly collection since GST’s inception.

    Why discuss this?

    • The Goods and Services Tax (GST) system in India has been a pivotal component of the country’s tax structure since its implementation in July 2017.
    • Analyzing the trends and performance of GST revenues offers insights into the economic health and growth trajectory of the nation.

    Gross Revenues Overview

    • Yearly Comparison: The fiscal year 2023-24 witnessed a noteworthy increase, reaching ₹18.4 lakh crore, indicating an 11.7% rise from the previous year.
    • Yearly Uptick: This year’s growth stands as the third highest since the implementation of GST.
    • Domestic Transactions: Revenues from domestic transactions surged by 13.9%.
    • Imported Goods: Revenue from goods imports also saw a notable increase, rising by 8.5%.

    State-wise Breakdown

    • Overall Collection Analysis: After accounting for refunds, February’s GST collection amounted to ₹1.51 lakh crore, indicating a substantial 13.6% growth from the previous year.
    • State Variability: States exhibited diverse performances, with some experiencing declines while others exceeded national growth averages.
    • Declining Revenues: Five states witnessed contractions, with Mizoram and Manipur showing significant decreases.
    • Outperforming States: Twelve states, including Jammu and Kashmir, Assam, and Maharashtra, surpassed the national average growth rate.

    Compensation Cess Details

    • Components of GST Intake: February’s gross GST intake included CGST, SGST, and IGST, amounting to ₹84,098 crore.
    • Cess Collections: Compensation cess collections amounted to ₹12,839 crore, with additional revenue from imported goods.
    • Revenue Distribution: The Central government allocated substantial sums to CGST and SGST from IGST collections.
    • Revenue Allocation: After regular distributions, CGST received ₹73,641 crore, while SGST received ₹75,569 crore.

    About Goods and Services Tax (GST)

    • Definition: GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
    • Legislation: The GST Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. It is a single domestic indirect tax law for the entire country.
    • Tax Structure: It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
    • Taxation Points: Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

    Components of GST

    • CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra).
    • SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra).
    • IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu).

    Advantages of GST

    • GST has mainly removed the cascading effect on the sale of goods and services.
    • Removal of the cascading effect has impacted the cost of goods.
    • Since the GST regime eliminates the tax on tax, the cost of goods decreases.
    • Also, GST is mainly technologically driven.
    • All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

    Issues with GST

    • High operational cost.
    • GST has given rise to complexity for many business owners across the nation.
    • GST has received criticism for being called a ‘Disability Tax’ as it now taxes articles such as braille paper, wheelchairs, hearing aid etc.
    • Fuels are not under GST, which goes against the ideals of the unification of commodities.

    Try this PYQ from CSP 2015:

    Q. All revenues received by the Union. Government by way of taxes and other receipts for the conduct of Government business are credited to the:

    (a) Contingency Fund of India

    (b) Public Account

    (c) Consolidated Fund of India

    (d) Deposits and Advances Fund

    [wpdiscuz-feedback id=”suvm1rufdq” question=”Please leave a feedback on this” opened=”1″]Post your responses here.[/wpdiscuz-feedback]

  • RBI updates the Framework related to Regulatory Sandbox scheme

    Why in the News?

    Recently, there have been significant updates made to the guidelines for the Regulatory Sandbox (RS) scheme by the RBI.

    What is the Regulatory Sandbox (RS) scheme?

    • Regulatory Sandbox (RS) scheme involves live testing of new financial products or services in a controlled regulatory environment with potential relaxations for testing purposes.
    • It allows regulators, innovators, financial service providers, and customers to test new financial innovations, collecting evidence on benefits and risks.
    • It facilitates the development of innovation-friendly regulations, enabling the delivery of low-cost financial products.
    • It enables Dynamic Regulatory Environments that adapt to emerging technologies

    What is the objective behind this decision of RBI?

    • Through this decision, RBI aims to encourage responsible innovation in financial services and ensure compliance with digital personal data protection norms.
      • This new adopted framework will enable on-tap proposals, replacing the previous structure where RBI presented the challenges to a cohort of technology firms and required them to devise solutions within a specified time frame.
    • Secondly, through this decision, the central bank (RBI) remains committed to supporting innovation and technology in the financial sector.
      • For example, recenty, the Paytm Payments Bank, due to its failure to comply with RBI norms, stifled innovation.

    Key Highlights of the RBI’s Updated guidelines on Regulatory Sandbox scheme:

    • Framework Alignment with Digital Personal Data Protection Act: The updated framework requires sandbox entities to ensure compliance with provisions of the Digital Personal Data Protection Act, 2023.
    • Diverse Range of Target Applicants: The target applicants for entry to the RS are fintech companies, including startups, banks, financial institutions, any other company, Limited Liability Partnership (LLP) and partnership firms, partnering with or providing support to financial services businesses.
    • Digital Personal Data Protection Norms Compliance: Under the updated guidelines, participating entities will have to comply with digital personal data protection norms.
    • Origins of Regulatory Sandbox Framework: The RBI had issued the ‘Enabling Framework for Regulatory Sandbox’ in August 2019, after wide ranging consultations with stakeholders.

     What is the Significance of Regulatory Sandbox?

    • Learning by doing: RS provides empirical evidence on benefits and risks of emerging technologies, enabling regulators to make informed decisions.
    • Testing viability: RS allows testing of product’s viability without large-scale roll-out, enabling modifications before broader market launch.
    • Financial inclusion: RS can improve pace of innovation and technology absorption, leading to financial inclusion and improved financial reach.
    • Evidence-based decision-making: RS reduces dependence on industry consultations for regulatory decision-making.
    • Better outcomes for consumers: RS leads to increased range of products, reduced costs, and improved access to financial services.

    What are the challenges along with Regulatory Sandbox scheme?

    • Flexibility and time: Innovators may face constraints in the sandbox process, but time-bound stages can mitigate this.
    • Bespoke authorizations: Transparent handling of applications and clear decision-making principles can address risks associated with discretionary judgments.
    • Legal waivers: The RBI or its RS does not provide legal waivers.
    • Regulatory approvals: Successful experiments in the sandbox may still require regulatory approvals for wider application.
    • Legal issues: Transparency and clear criteria in the RS framework can mitigate legal issues like consumer losses, ensuring clarity on liability for risks.

    Conclusion: The RBI’s updated Regulatory Sandbox guidelines promote responsible financial innovation. Addressing time constraints and ensuring transparent post-sandbox approvals are vital for fostering a conducive environment for ongoing advancements in the financial sector.

  • India’s First Hydrogen Fuel Cell Ferry: A Technological Marvel

    hydrogen

    In the news

    • Prime Minister has unveiled India’s maiden indigenous hydrogen fuel cell ferry, a groundbreaking achievement in the country’s maritime sector.

    About Harit Nauka Initiative

    • In January 2024, the Shipping Ministry unveiled the guidelines for inland vessels.
    • As per the guidelines, all states have to make efforts to use green fuels for 50 per cent of inland waterways-based passenger fleets in the next one decade, and 100 per cent by 2045.
    • This is to reduce greenhouse gas emissions as per the Maritime Amrit Kaal Vision 2047.

     

    Hydrogen Fuel Cell Ferry: Key Features

    • Design: The 24-meter-long catamaran ferry accommodates up to 50 passengers in its air-conditioned area, constructed with high-quality fiberglass reinforced plastic.
    • Manufacture: Manufactured by Cochin Shipyard Limited (CSL), the vessel will revolutionize water transportation and contribute to India’s green mobility initiatives.
    • Propulsion: Powered by a 50-kW Proton-Exchange Membrane (PEM) fuel cell and Lithium-Ion Phosphate batteries, the vessel operates with zero emissions and minimal noise, offering enhanced energy efficiency.
    • Energy Source: Hydrogen fuel, stored in five cylinders onboard, fuels the vessel’s propulsion system, supplemented by a 3-kW solar panel for additional energy generation.

    Operational Mechanism

    • Hydrogen Fuel Cells: The vessel utilizes hydrogen fuel cells to generate electricity by harnessing the chemical energy of hydrogen, emitting only pure water as a byproduct.
    • Continuous Operation: Unlike conventional batteries, hydrogen fuel cells do not require recharging, ensuring continuous operation with uninterrupted fuel and oxygen supply.

    Indigenous Development

    • Collaborative Effort: Cochin Shipyard Limited spearheaded the vessel’s construction, incorporating indigenous hydrogen fuel cell systems developed by KPIT Technologies and Council of Scientific and Industrial Research Labs.
    • Early Mover Advantage: India’s pioneering hydrogen fuel cell ferry underscores the nation’s commitment to green technology and positions it as a frontrunner in maritime sustainability.