💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • MIIRA: India readies plan to popularise millets on world stage

    On the premises of G20, India is planning to propose the launch of a global initiative ‘MIIRA’ to encourage the consumption and production of millets.

    What are Millets?

    millet

    • Millets are a group of small-seeded grasses that are commonly cultivated and consumed as staple foods in many parts of the world, including Africa and Asia.
    • Millets are highly nutritious, gluten-free, and have a low glycemic index, making them an ideal food for people with various dietary requirements and health conditions.
    • They are cereals such as sorghum (jowar), pearl millet (bajra), foxtail millet (kangni/ Italian millet), little millet (kutki), kodo millet, finger millet (ragi/ mandua), proso millet (cheena/ common millet), barnyard millet (sawa/ sanwa/ jhangora), and brown top millet (korale).

    What is MIIRA?

    • “MIIRA” or Millet International Initiative for Research and Awareness will be aimed at coordinating millet research programmes at the international level.
    • For MIIRA to take off, India will contribute the “seed money” while each G20 member will later have to contribute to its budget in the form of a membership fee.
    • The secretariat will be in Delhi, the sources said, adding that this will, with India being a major producer of millets, ensure a flow of investment from the country’s industry and research bodies.
    • It is in line with the UN declaring 2023 as the International Year of Millets and the Centre’s plan to make India a global hub for millets.
    • It is launched keeping in mind the nutritional value and the climate-resilient nature of millets.

    Key objectives

    • MIIRA will aim to connect millet research organisations across the world while also supporting research on millet crops.
    • Besides setting up a web platform to connect researchers and holding international research conferences, the plan is also to promote millet consumption by raising awareness.

    Ecological significance of millets

    • Drought resistance: Millets are drought-resistant crops, which means that they can grow in areas with low rainfall and are less susceptible to the effects of drought. This makes them an ideal crop for farmers in regions that are prone to drought and other climate-related risks.
    • Soil health: Millets have shallow roots and can grow in poor soil, which means that they can be cultivated in marginal lands that are unsuitable for other crops. Millets also improve soil health by enhancing soil organic matter, reducing soil erosion, and improving soil structure and fertility.
    • Low carbon footprint: Millets have a low carbon footprint compared to other crops because they require less water, fertilizer, and pesticides. They are also less energy-intensive to produce and transport.
    • Resilience to climate change: Millets are known for their resilience to climate change and extreme weather events, such as floods and droughts. By promoting the cultivation and consumption of millets, countries can build resilience to the impacts of climate change and ensure food security in the face of these challenges.
    • Biodiversity conservation: Millets are often grown in mixed cropping systems, which promote biodiversity and can help conserve natural resources. The cultivation of millets also supports the conservation of traditional knowledge and local agricultural practices, which can be important for the resilience of rural communities in the face of climate change.

    Recent initiatives to promote Millets

    • Finance Minister described various types of millets as ‘Shree Anna’ in her budget speech.
    • To make India a global hub for Shree Anna, the Indian Institute of Millet Research, Hyderabad will be supported as the Centre of Excellence.
    • In 2018, the Agriculture Ministry declared some millets as ‘Nutri Cereals’ for their “high nutritive value”.

    How popular are millets globally?

    • Now grown in more than 130 countries, millets are the traditional food for more than half a billion people in Asia and Africa.
    • Gobally, jowar is the most widely grown millet crop; its major producers are the US, China, Australia, India, Argentina, Nigeria, and Sudan.
    • Bajra, another major millet crop, is mainly grown in some African countries and India, where millets are mainly a kharif crop.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Role of regulators in the Stock Market

    regulator

    Context

    • On 25 January, US-based Hindenburg Research put out a tweet, talking about a negative report on the Adani Group that it had published. The report made many allegations against the group which triggered a fall in the price of their listed stocks.

    Crack Prelims 2023! Talk to our Rankers

    Just think of this situation

    • A research report is released by a global firm that is also a short seller (that is, one who sells shares that it does not own, but buys them back at a lower price once the price falls).
    • The report outlines areas of concern in a company that is listed in another jurisdiction. The issues raised could relate to the firm’s accounting or market practices.
    • The report is released, quite curiously, before the company is going in for an equity issuance.

    What happens after the news?

    • Panic sale: As equity markets run on sentiments, such news leads to a panic sale and the share price of the company comes down sharply.
    • Widespread uncertainty: The market sees investor wealth eroding sharply, leading to widespread uncertainty, as this is how contagions progress.
    • Outrage: Denials are issued by the concerned company while the short seller stands firm on its views. However, shareholders have seen an erosion in their wealth and there is outrage everywhere.

    In such a situation, what can the regulator do?

    • Policies and system in place to put verified facts in public domain: It is for regulators in other jurisdictions to have policies/systems in place for verified facts to be put in the public domain.
    • In the current context: The Securities and Exchange Commission of the US would matter and if the broker complied with its rules, then there is nothing to stop their views from being aired in a globalised world. This is why it is said that if any company opts for listing in overseas markets, there is more reason to ensure that its accounts are in place and there are no deviations from best practices.

    What can regulators do to protect investors?

    • It is necessary to understand that when share prices tumble: Only when someone sells the shares that have declined in value will a loss be actually incurred. This is the first point that ordinary investors need to keep in mind. While the media will talk of the loss of value and wealth, it is notional for those shareholders who don’t sell. And stock prices will return to their equilibrium once the storm passes.
    • There is a need to have a wide market intelligence network: A special division that continuously analyses the messaging about Indian companies across the world. Given that such reports do not come up without signals being sent along the way, monitoring of views on companies listed overseas would be essential.
    • While citing financial accounting irregularities need to be looked into: the accounting and auditing firms need to take on more responsibility to ensure that the Generally Accepted Accounting Practices (GAAP) are followed for overseas-listed firms. They will have to be made partners in any such crisis in terms of taking ownership and clarifying the same.
    • Detecting price manipulation: Price manipulation, for instance, is one practice that has always been a concern for regulators. And it takes a lot of experience to detect it. Thus exchanges need to ensure that their market watch and surveillance practices are robust. This is where trading patterns can show if there has been market manipulation.
    • Restoring assurance and sanity in the market: It is necessary that investors have some assurance from the regulator, which may be needed to restore sanity in the markets. However, this should be an immediate and time-bound investigation which looks at the allegations or the shortcomings of the report.
    • Investing derivative segments too: As a corollary, the regulator needs to investigate the derivative segment too and probably talk to other regulators to analyse how the short positions have been created and whether they were in order. This will mean being in touch with other regulators, especially the SEC which regulates the jurisdiction for most overseas listings.
    • Audit firms can be employed to flag off the concerns: The regulator should insist that all overseas listed companies have regular investor calls with stakeholders where meetings are recorded and transmitted back home for special teams to examine so that there is a sense of how potential investors feel about the companies.

    Conclusion

    • In the cases of overseas reports, investors must have some assurance from the regulator, which can restore sanity in the markets. But investors also need to be proactive when investing. Those who are more active investors would perhaps need to be aware of developments in the companies that they have invested in.

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • India’s Agricultural Farm Exports data expected to reach a new high

    export

    India’s agricultural exports are poised to scale a new peak in the financial year ending March 31, 2023. But so are imports, bringing down the overall farm trade surplus.

    Agriculture trade in a nutshell

    • India’s agricultural exports are expected to reach a new high in FY 2022-23.
    • The value of farm exports from April-December 2022 was 7.9% higher than the same period of the previous year, totalling $39 billion.
    • Imports of agricultural produce have also grown 15.4% from $24.1 billion in April-December 2021 to $27.8 billion in April-December 2022, resulting in a shrinking of the overall farm trade surplus.
    • As a result, there has been a further shrinking of the surplus on the farm trade account.

    Note: This newscard provides useful insights regarding agricultural exports-import balance. Aspirants are not advised to memorize the numbers but imbibe the trend.

    Drivers of Exports

    The two big contributors to India’s agri-export growth have been rice and sugar.

    (1) Rice

    • India in 2021-22 shipped out an all-time-high 21.21 million tonnes (mt) of rice valued at $9.66 billion.
    • That included 17.26 mt of non-basmati (worth $6.12 billion) and 3.95 mt ($3.54 billion) of basmati rice.
    • In the current fiscal, the growth has been primarily led by basmati rice.
    • Its exports have gone up by 40.3% in value (from $2.38 billion in April-December 2021 to $3.34 billion in April-December 2022).
    • The corresponding increases have been less for non-basmati exports: 3.3% in value ($4.51 billion to $4.66 billion) and 4.6% in quantity (12.60 mt to 13.17 mt).

    (2) Sugars

    • Sugar exports hit a record value of $4.60 billion in 2021-22, as against $2.79 billion, $1.97 billion, $1.36 billion, and $810.90 million in the preceding four fiscals.
    • This fiscal has seen a further surge of 43.6%, from $2.78 billion in April-December 2021 to $3.99 billion in April-December 2022.
    • India exports of rice and sugar are well on course to touch, if not top, $11 billion and $6 billion respectively in 2022-23.

    Key imports

    More than a general export slowdown, it’s the growth in imports that should be cause for concern.  This has come mainly from three commodities-

    (1) Edible oils

    • The first is vegetable oils, whose imports shot up from $11.09 bn in 2020-21 to $18.99 bn in 2021-22.
    • Imports now account for over 60% of the country’s estimated 22.5-23 mt annual oil consumption.

    (2) Cotton

    • India has turned from a net exporter to a net importer of cotton.
    • India’s cotton exports reached an all-time-high of $4.33 bn back in 2011-12.
    • It remained at reasonably high levels until 2013-14 ($3.64 bn), before plunging to $1.62 bn by 2016-17 and $1.06 bn in 2019-20.
    • There was a recovery thereafter to $1.90 bn in 2020-21 and $2.82 bn in 2021-22.
    • But during this fiscal, imports have also soared from $414.59 million to $1.32 billion for the same period.

    Policy implications

    export

    • It can be seen how closely India’s farm performance is linked to international commodity prices.
    • The UN Food and Agriculture Organization’s (FAO) Food Price Index — having a base value of 100 for the 2014-16 period — averaged 122.5 points in 2012-13 and 119.1 points in 2013-14.
    • Those were the years when India’s agri-exports were at $42-43 billion. As the index crashed to 90-95 points in 2015-16 and 2016-17, so did exports to $33-34 billion.
    • The exports recovery in 2020-21 and 2021-22 happened along with — rather, on the back of — rising global prices and the FAO index averaging 102.5 points and 133 points in the two years.

    Inferences from this trend

    Ans. India’s farm exports will slow down in the months ahead.

    • Moreover, this could be accompanied by increased imports, as was the case from 2014-15 to 2017-18.
    • In the event, the focus of policymakers too, may have to shift from being pro-consumer (to the extent of banning/ restricting exports) to pro-producer (providing tariff protection against unbridled imports).

    Way forward

    • The government needs to do something about cotton and edible oils.
    • India’s cotton production has declined from the high of 398 lakh bales in 2013-14 to a 12-year low of 307.05 lakh bales in 2021-22.
    • Clearly, the effects of not allowing new genetic modification (GM) technologies after the first-generation Bt cotton are showing, and impacting exports as well.
    • A proactive approach is required in edible oils as well, where planting of GM hybrid mustard has been permitted with great reluctance — and which is now a matter before the Supreme Court.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Eastern Rajasthan Canal Project (ERCP)

    canal

    Rajasthan has brought up the issue of the Eastern Rajasthan Canal Project or ERCP before the Prime Minister.

    Why in news?

    • The Chief Minister has said that it is not possible for the state government to bear the estimated project cost of around Rs 40,000 crore by itself.
    • The state wants the Centre to declare this as a national project so that the cost-sharing ratio between the Centre and the state becomes 90:10.

    Eastern Rajasthan Canal Project (ERCP)

    • ERCP was incepted with the aim of providing water to the drought-prone areas of the state.
    • It aims to harvest surplus water available during the rainy season in rivers in southern Rajasthan, such as the Chambal and its tributaries Kunnu, Parvati, and Kalisindh.
    • The project consists of the construction of two canals:
    1. Chambal Canal (which originates from the Chambal River)
    2. East Rajasthan Canal (which originates from the Mahi River)
    • The ERCP is expected to irrigate about 3.4 million hectares of agricultural land in Rajasthan and Madhya Pradesh states.
    • It is estimated to cost about Rs 51,000 crore and was expected to be completed by 2021.
    • The project was expected to benefit about 2.6 million farmers in Rajasthan and an additional 2.4 million in Madhya Pradesh.

    When was the ERCP conceived?

    • In the state Budget for 2017-18, then Rajasthan government had said that the ERCP will help fulfil the long-term irrigation and drinking water needs of 13 districts: Jhalawar, Baran, Kota, Bundi, Sawai Madhopur, Ajmer, Tonk, Jaipur, Karauli, Alwar, Bharatpur, Dausa, and Dholpur.
    • The project was approved by the Central Water Commission in 2017.
    • The state government had sent a proposal to the central government to declare ERCP as a project having national importance.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

    https://indianexpress.com/article/explained/ercp-rajasthan-rivers-project-ashok-gehlot-narendra-modi-8440734/

  • Discovery of Lithium Deposits in J&K

    lithium

    The Geological Survey of India found “inferred resources” of 5.9 million tonnes of lithium in the Salal-Haimana area of Reasi district in Jammu and Kashmir.

    What is Lithium?

    • Lithium is a chemical element with the symbol Li and atomic number 3.
    • It is a soft, silvery-white alkali metal and is the lightest metal on the periodic table.
    • It is used in a variety of applications, including batteries, lubricants, pharmaceuticals, and nuclear weapons.

    What are Inferred Resources?

    • According to the mines and minerals act, the exploration for any mineral deposit involves four stages: reconnaissance survey (G4), preliminary exploration (G3), general exploration (G2) and detailed exploration (G1).
    • Resources identified after G4 are called ‘reconnaissance mineral resource”, those identified after G3 are “inferred mineral resource”, G2 leads to “indicated mineral resource” and G4 precedes “measured mineral resource.”

    Applications of Lithium

    • Lithium-ion batteries: Lithium-ion batteries are widely used in consumer electronics such as laptops, cellphones, and portable music players due to their high energy density and low self-discharge rate.
    • Pharmaceuticals: Lithium is used in the treatment of bipolar disorder and other mental health disorders. It can be used to treat symptoms such as depression, anxiety, and aggression.
    • Heat transfer fluids: Lithium is used as a heat transfer fluid in nuclear power plants, as it can absorb and store large amounts of heat.
    • Air conditioning: Lithium-based compounds are used in air conditioning systems to absorb and store heat, which helps to cool air.
    • Alloy production: Lithium is used to produce lightweight alloys for aircraft and spacecraft, as well as components for other vehicles.
    • Grease lubricants: Lithium-based grease lubricants are used in automotive and industrial applications due to their high temperature and pressure tolerance.

    Significance of this discovery

    • Clean energy goals: This has raised hopes of India possibly developing its own source of a metal key to its clean energy goals.
    • Import cuts: It would reduce the need for imports. The government was taking several measures to secure minerals, including lithium, from Australia and Argentina.
    • Enhance battery production: The find is a major boost to the manufacture of rechargeable batteries for smartphones, laptops and electric cars.

    Back2Basics: Mines and Minerals (Development and Regulation) Act, 1957

    • It is an Act of the Parliament enacted to regulate the mining sector in India.
    • It regulates all activities related to the prospecting for, extraction and disposal of minerals in India.
    • The Act was amended in 2015 to incorporate the changes brought about by the Mines and Minerals (Development and Regulation) Amendment Act, 2015.
    • The amendment Act has been enacted to ensure that the mining sector is developed in a sustainable and efficient manner, taking into account the interests of stakeholders including the local communities.
    • The Act also provides for the sharing of revenues between the Union and the States.

    Types of Minerals Covered

    • Metallic Minerals: Iron ore, manganese ore, chrome ore, bauxite, copper ore, gold ore, lead ore, zinc ore, etc.
    • Non-Metallic Minerals: Mica, limestone, dolomite, gypsum, phosphorite, graphite, quartz, sandstone, etc.
    • Atomic Minerals: Uranium, thorium, and other radioactive minerals.
    • Fossil Fuels: Oil, natural gas, coal, etc.
    • Minor Minerals: Building stones, gravel, ordinary clay, ordinary sand, etc.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • In news: Delhi-Mumbai Expressway

    delhi

    Photos of the soon-to-be-inaugurated Delhi-Mumbai Expressway have gone viral, receiving widespread appreciation online.

    Delhi-Mumbai Expressway

    • The Delhi-Mumbai Expressway is a proposed 1380 km expressway that will link the capital city of Delhi to Mumbai, India.
    • The expressway is being planned as a six-lane expressway and will pass through the states of Uttar Pradesh, Rajasthan, Madhya Pradesh and Maharashtra.
    • Started in 2018, the project is set to be completed by the end of 2023.
    • The expressway is expected to reduce the travel time between Delhi and Mumbai by up to 12 hours.
    • The expressway will also have several rest stops and will be equipped with advanced technology such as electronic toll collection, smart traffic management and surveillance systems.
    • The expressway will be built in a Public-Private Partnership (PPP) model.

    Some basic details

    • The expressway is being constructed with an initial budget of INR 98,000 crore.
    • According to claims by the Ministry of Road Transport and Highways, it will reduce the distance between Delhi and Mumbai by 180 km (from 1424 km to 1242 km).
    • Depending on the volume of traffic the expressway sees, there are plans in place to expand it to a 12-lane expressway in the future.
    • The reduction in distance and travel time is set to result in annual fuel savings of more than 320 million litres and reduce CO2 emissions by 850 million kg.

    Some unique features

    • Importantly, the Delhi-Mumbai Expressway is set to introduce certain features seldom seen in road construction in India.
    • According to claims from the Ministry of Road Transport and Highways, the expressway will boast of a state-of-art traffic management system.
    • There will also be a dedicated three metre wide corridor for laying utility lines including fibre optic cables, pipelines as well as solar power generation.
    • The expressway will also have provisions for rain water harvesting at intervals of 500 m, with over 2000+ water recharge points.

    Provisions for wildlife conservation

    • A crucial feature of the project will be its provisions for “wildlife conservation”.
    • The expressway is the first in Asia and only the second in the world to feature animal overpasses and underpasses to facilitate unrestricted movement of wildlife.
    • Furthermore, the expressway has been aligned in a way to minimize the destruction of protected forests.
    • Two iconic 8-lane tunnels will also be built, one through Mukundra sanctuary without disturbing the endangered fauna in the region and the second through the Matheran eco-sensitive zone.
    • A 3 ft tall boundary wall and sound barriers will also be constructed in sections prone to wildlife.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Pulses: The sustainable crops

    sustainable

    Context

    • The United Nations General Assembly endorsed the request made by the Government of Burkina Faso regarding the annual observance of World Pulses Day on 10 February at its 73rd session in December 2018, building on the success of the 2016 International Year of Pulses, with Food and Agriculture Organisation (FAO) playing a leading role in the campaign.

    Crack Prelims 2023! Talk to our Rankers

    sustainable

    Theme for World pulses day 2023

    • The 2023 World Pulses Day’s theme is Pulses for a Sustainable Future, which underlines the significance of pulses in fostering equity and generating chances for livelihood, both of which are essential elements of sustainable agrifood systems.

    sustainable

    In short: All you need to know about Pulses

    • Major pulses that are grown in India: Tur, urad, moong, masur, peas and gram.
    • Chief Characteristics:
    • Pulses are the major sources of protein in a vegetarian diet.
    • Being leguminous crops, all the above-mentioned pulses (except tur) help in restoring soil fertility by fixing nitrogen from the air.
    • These crops are mostly grown in rotation with other crops.
    • Pulses need less moisture and survive even in dry conditions.
    • Important Producing Areas: The major pulse producing areas are Madhya Pradesh, Uttar Pradesh, Rajasthan, Maharashtra and Karnataka. It is grown on about 11% of the total sown area in India.
    • India is largest producer and consumer: India is the largest producer as well as consumer of pulses in the world. About 25% of the pulses of the world are produced here.

    sustainable

    In Depth: Why pulses are important?

    • Pulses withstand drought: Pulses have a lower water footprint than other food crops and are better able to withstand drought and climate-related calamities making them a crucial tool for adjusting to and reducing climate change.
    • Help farmers in water scarce region: They also help farmers in water-scarce regions have a better quality of lives.
    • Can help to increase productivity and livelihood: In a number of farming systems, including agroforestry, intercropping, and integrated farming systems, pulses can help to increase productivity and improve the resilience of agricultural livelihoods.
    • Pulses ensures wholesome food and sustainable use of natural resources: The global pulses industry which deals with the production and trade of pulses also demonstrates to be a beneficial force in ensuring the stability of regional and global supply chains, enabling consumers to access wholesome foods, and promoting the sustainable use of natural resources.
    • Most Valuable Player for Health: Pulse grains have been acknowledged as being a “Most Valuable Player” in preventing obesity, lowering chronic diseases such as diabetes and heart disease, and fostering a varied microbiome in children who are at risk of stunting during the first 1,000 days of their life.
    • Two to three times as much protein as cereals: Pulses are a great choice for populations with diets low in protein because they contain two to three times as much protein as cereals.
    • Pulses provide a number of other assets to the climate change battle: They lessen the requirement for fertiliser throughout the entire crop cycle and reduce greenhouse gas emissions by fixing atmospheric nitrogen.
    • Help to achieve SDG’s: A significant advantage in a changing climate is that many pulse crops are evolved to grow in arid circumstances and can withstand drought stress better than most other crops. Thus, achieving Sustainable Development Goals 2, 3, and 13 which call for improved human health, sustainable agriculture, food security, and climate action.

    sustainable

    Pulse consumption in India

    • Imports are necessary because of insufficient production: India is currently the world’s largest producer and consumer of pulses, but because production is insufficient to meet demand, imports are necessary.
    • India’s demand for pulses has steadily increased: In keeping with the government’s measures to expand pulse production to meet domestic demand, the volume of imports has consistently decreased since 2014-15.
    • National Food Security Mission-Pulses programme: To increase the production of pulses, the Government of India is implementing National Food Security Mission-Pulses programme across 644 districts of 28 States and Union Territories (UTs) of Jammu & Kashmir and Ladakh.
    • In Indian diets, pulses are a crucial source of protein: Children, adolescent girls, and pregnant and lactating women receive half of the recommended dietary requirement of protein through the Government of India’s food security programmes.

    Way ahead

    • Pulses to combat malnutrition: Pulses can be included to cereal-based meals to help combat malnutrition. There is evidence to support the fact that people who eat pulses more frequently are more nutrient-secure.
    • For example: During the pandemic, 5 kg of rice/wheat and 1 kg of selected pulses were provided to the poor under the Pradhan Mantri Garib Kalyan Yojana.
    • PDS can be utilised for better accessibility and affordability: As a matter of policy, the PDS should offer pulses at discounted prices to increase their accessibility and affordability to vulnerable population.
    • For instance: Some states, including Andhra Pradesh, Telangana, Haryana, and Himachal Pradesh, have been successful in distributing pulses under the Public Distribution System (PDS).

    Conclusion

    • India is moving closer to Aatmnirbharta on pulses with consistent efforts by the government. It is vital to raise awareness about the benefits of eating pulses that are high in macronutrients for both sustainability and dietary needs.

    Mains question

    Q. India is expanding its pulse production to meet domestic demand. In this light discuss what makes pulses a significant crop?

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

     

  • No Rationalization of GST structure for now: Revenue Secretary

    The long-awaited rationalization of the multiple rate structure of the Goods and Services Tax (GST) regime is off the table for now and unlikely to materialize in the near future.

    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.

    Issues with GST structure

    • Complexity of the GST Structure: The GST structure is quite complex and difficult to understand, which has led to confusion among businesses and consumers alike. This has also led to an increase in the cost of compliance and administration for businesses.
    • Heterogeneity of Rates: One of the main issues with the GST structure is the heterogeneity of rates across different goods and services. This has led to an increase in the cost of compliance for businesses as they need to be aware of the applicable GST rate for each product and service.
    • Dual GST System: India has a dual GST system, which has led to confusion and complexity for businesses that have to deal with both the central GST (CGST) and the state GST (SGST). This has also led to an increased cost of compliance for businesses.
    • Cascading Taxation: The GST structure has led to the problem of cascading taxation, wherein taxes are levied at every stage of the supply chain, leading to an increase in the cost of goods and services.
    • Lack of Transparency: The GST structure has led to a lack of transparency in the pricing of goods and services, as the applicable taxes are not clearly indicated in the invoice.
    • Poor collection infrastructure: The GST system requires a strong infrastructure in order to function properly, which is not always present in India. This can lead to delays in filing and other issues.

    Why rationalize GST slabs?

    • Complex duty structure: From businesses’ viewpoint, there are just too many tax rate slabs, compounded by aberrations in the duty structure through their supply chains with some inputs taxed more than the final product.
    • Multiple rate changes: This has been since the introduction of the GST regime in July 2017 have brought the effective GST rate to 11.6% from the original revenue-neutral rate of 15.5%.
    • Stipulated revenue losses: Merging the 12% and 18% GST rates into any tax rate lower than 18% may result in revenue loss.

    Benefits of GST rationalization

    • Easier compliance: Rationalizing GST slabs helps simplify the tax structure and make it easier for businesses to comply with the law.
    • Fairness of taxation: It also helps to ensure that the tax burden is shared fairly and that the revenue generated is used efficiently.
    • Efficiency in tax collection: Finally, rationalizing GST slabs leads to more efficient collection of taxes, which helps to reduce the cost of compliance for businesses.

    Conclusion

    • Rate rationalization is probably the biggest ‘reform’ that is required to make the GST regime more efficient.
    • As and when the exercise is complete, it is expected that the GST would be a less complex system that not only would make compliances easier but also boost revenue collection.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Explained: Status and proceeds of Disinvestment

    disinvestment

    In the Union Budget for 2023-24, the government has set a disinvestment target of ₹51,000 crore, down nearly 21% from the budget estimate for the current year and just ₹1,000 crore more than the revised estimate.

    Lowest Disinvestment target in years

    • It is also the lowest target in seven years.
    • The Centre has not met the disinvestment target for 2022-23 so far.
    • It has realised ₹31,106 crore to date, of which, ₹20,516 crore or close to a third of the budgeted estimate came from the IPO of 3.5% of its shares in the Life Insurance Corporation (LIC).

    What is Disinvestment?

    • Disinvestment or divestment, in this context, is when the government sells its assets or a subsidiary, such as a Central or State public sector enterprise.
    • There are the three main approaches to disinvestment
    1. Minority disinvestment: The government retains a majority in the company, typically greater than 51%, thus ensuring management control.
    2. Majority disinvestment: The government hands over control to the acquiring entity but retains some stake.
    3. Complete privatisation: 100% control of the company is passed on to the buyer.

    Objectives of disinvestment

    The following main objectives of disinvestment were outlined:

    • To reduce the financial burden on the Government.
    • To improve public finances.
    • To introduce, competition and market discipline.
    • To fund growth.
    • To encourage wider share of ownership.
    • To depoliticize non-essential services.

    Institutional mechanism

    Ans. DIPAM

    • The Union Finance Ministry has a separate department for undertaking disinvestment-related procedures called the Department of Investment and Public Asset Management (DIPAM).

    Why need disinvestment?

    • Reduce money crunch: The government may disinvest in order to reduce the fiscal burden or bridge the revenue shortfall for that year.
    • Deficit financing: It also uses disinvestment proceeds to finance the fiscal deficit, to invest in the economy and development or social sector programmes, and to retire government debt.
    • Promote private ownership facilitation: Disinvestment also encourages private ownership of assets and trading in the open market.
    • Do away with loss-making: If successful, it also means that the government does not have to fund the losses of a loss-making unit anymore.

    Other importance of disinvestment lies in the utilization of funds for:

    1. Financing large-scale infrastructure development
    2. Investing in the economy to encourage spending
    3. For social programs like health and education

    How has disinvestment fared in India?

    Ans. Disinvestment in India has had mixed results.

    • Since the current government came to power in 2014, it has made significant progress in disinvestment, having raised a record ₹1.05 trillion (US$14.6 billion) for the fiscal year of 2017–18.
    • However, the government has also failed to reach its disinvestment targets in other years, due to various reasons such as market conditions, investor sentiment, and political opposition.
    • The government has also been criticized for not doing enough to find potential buyers for state-owned companies.
    • Despite this, recent years have seen several successful disinvestment deals, such as the strategic sale of Air India and the privatization of BPCL.

    Issues with CPSEs through years

    • Inherent flaws in PSU’s: The entire PSU’s mechanism did not turn out as efficient as it ought to be, all thanks to the prevailing hierarchy and bureaucracy.
    • Lack of autonomy: Lack of autonomy, political interference, nepotism & corruption has further deteriorated the situation.
    • Revenue losses: Due to the expenditure on items such as interest payments, wages and salaries of PSU employees and subsidies, the Government is left with hardly any surplus for capital expenditure on social and physical infrastructure.
    • Lack of Competitiveness: In an era of LPG industrial competitiveness has especially assumed an important role, necessitating privatization or disinvestment of PSUs.
    • Poor performance: Despite the huge injection of funds in the past decades, the functioning of many public sector units (PSUs) has traditionally been characterized by poor management, slow decision-making procedures, lack of accountability, low productivity, unsatisfactory quality of goods, excessive manpower utilization etc.

    Conclusion

    • Confronted with an unprecedented fiscal deficit and worried by an economy in crisis, the government has to find resources.
    • Disinvestment is a preferred option for ideological and practical reasons.
    • Short-term financial exigencies should not be the Centre’s sole reason for disinvestment in core sectors like petroleum.
    • The government could utilize the money gained by selling off PSUs to improve services in public goods like infrastructure, health and education.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • RBI announces pilot for QR code-based Coin Vending Machine

    qr

    To improve the distribution of coins among members of the public, the Reserve Bank of India (RBI) is preparing a pilot project on QR code-based Coin Vending Machine (QCVM) in collaboration with a few leading banks.

    QR code-based Coin Vending Machine (QCVM)

    • The QCVM is a cashless coin dispensation machine which would dispense coins against a debit to the customer’s bank account using Unified Payments Interface (UPI).
    • Unlike cash-based traditional Coin Vending Machine, the QCVM would eliminate the need for physical tendering of banknotes and their authentication.
    • Customers will also have the option to withdraw coins in the required quantity and denominations in QCVMs.

    When will it be launched?

    • The pilot project is planned to be initially rolled out at 19 locations in 12 cities across the country.
    • Machines will be installed at public places such as railway stations, shopping malls, marketplaces to enhance ease and accessibility.
    • Based on the learnings from the pilot tests, guidelines would be issued to banks to promote better distribution of coins using QCVMs.

     

    Crack Prelims 2023! Talk to our Rankers

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more