đŸ’„Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • UPI123Pay: Payment solution for feature phone users

    The Reserve Bank of India has launched a new Unified Payments Interface (UPI) payments solution for feature phone users dubbed ‘UPI123Pay’.

    What is UPI?

    • UPI is an instant real-time payment system developed by NPCI facilitating inter-bank transactions.
    • The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

    What is UPI123Pay?

    • UPI ‘123PAY’ is a three-step method to initiate and execute services for users which will work on simple phones.
    • It will allow customers to use feature phones for almost all transactions except scan and pay.
    • It doesn’t need an internet connection for transactions. Customers have to link their bank account with feature phones to use this facility.
    • Feature phone users will now be able to undertake a host of transactions based on four technology alternatives.
    • They include calling an IVR (interactive voice response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments, the RBI said.
    • Such users can initiate payments to friends and family, pay utility bills, recharge the FAST Tags of their vehicles, pay mobile bills and also allow users to check account balances.
    • Customers will also be able to link bank accounts, set or change UPI PINs.

    Others: ‘Digisaathi’

    • A 24×7 helpline for digital payments has also been set up by the National Payments Corporation of India (NPCI).
    • The helpline christened ‘Digisaathi’ will assist the callers/users with all their queries on digital payments via website and chatbot.
    • Users can visit www.digisaathi.info or call on 14431 and 1800 891 3333 from their phones for their queries on digital payments and grievances.

    Why UPI123Pay was created?

    • UPI, which was introduced in 2016, has become one of the most used digital payments platforms in the country.
    • The volume of UPI transactions has already reached â‚č76 lakh crore in the current year, compared to â‚č41 lakh crore in FY21.
    • However, at present, efficient access to UPI is available largely via smartphones.

    How will users make payments without internet?

    The new UPI payments system offers users four options to make payments without internet connectivity:

    1. Interactive Voice Response (IVR): Users would be required to initiate a secured call from their feature phones to a predetermined IVR number and complete UPI on-boarding formalities to be able to start making financial transactions like money transfer, mobile recharge, EMI repayment, balance check, among others.
    2. App-based functionality: One could also install an app on feature phone through which several UPI functions, available on smartphones, will be available on their feature phone, except scan and pay feature which is currently not available.
    3. Missed call facility: The missed call facility will allow users to access their bank account and perform routine transactions such as receiving, transferring funds, regular purchases, bill payments, etc., by giving a missed call on the number displayed at the merchant outlet. The customer will receive an incoming call to authenticate the transaction by entering UPI PIN.
    4. Proximity sound-based payments: One could utilise the proximity sound-based payments option, which uses sound waves to enable contactless, offline, and proximity data communication on any device.

    How do UPI payments through sound work?

    • UPI payments using sound isn’t new. When Google Pay was first launched in 2017 as Tez, the app had a sound-based system of payments built in.
    • Google called this ‘Cash Mode’ in which phones would emit ultrasonic sounds that could be used by other Tez users to accept and receive money.
    • It’s somewhat like Bluetooth but instead of using radio waves, it uses sound waves to transfer data from one device to the next.
    • A company called ToneTag also produces audio-based point-of-sale machines.

    Is payment through sound secure?

    • Sound wave-based payments are meant to be contactless, but occur within a certain proximity only.
    • Ultrasonic waves are outside the usual human hearing range, but such payment systems can also use audible sounds, something that US-based startup Chirp showcased back in 2011.
    • Devices using such systems are encrypted, and only the devices involved can recognize the emitted waves.
    • The sound waves being emitted are encrypted, meaning the receiving device will need to have decryption codes to complete the transaction.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • [pib] National Land Monetisation Corporation (NLMC)

    The Union Cabinet has approved the setting up of a new government-owned firm National Land Monetisation Corporation (NLMC) for pooling and monetizing sovereign and public sector land assets.

    What is NLMC?

    • The National Land Monetisation Corporation (NLMC) is being formed with an initial authorised share capital of â‚č5,000 crore and paid-up capital of â‚č150 crore.
    • The government will appoint a chairman to head the NLMC through a “merit-based selection process” and hire private sector professionals with expertise.
    • The NLMC will undertake monetization of surplus land and building assets of Central public sector enterprises (CPSEs) as well as government agencies.

    How will it function?

    • NLMC will own, hold, manage and monetise surplus land and building assets of CPSEs under closure and surplus non-core land assets of Government-owned CPSEs under strategic disinvestment.
    • This will speed up the closure process of CPSEs and smoothen the strategic disinvestment process of Government-owned CPSEs, the statement said.
    • NLMC will undertake surplus land asset monetisation as an agency function, and assist and provide technical advice to the Centre in this regard.
    • The NLMC board will comprise senior Government officers and eminent experts, while its chairman and non-Government directors will be appointed through a merit-based selection process, the statement said.
    • The Corporation will have minimal full-time staff, hired directly from the market on a contract basis.

    Stipulated tasks

    • CPSEs have referred around 3,400 acres of land and other non-core assets to the Department of Investment and Public Asset Management (DIPAM) for monetisation.
    • Monetisation of non-core assets of MTNL, BSNL, BPCL, BEML, HMT, is currently at various stages of the transaction, as per latest data in the Economic Survey 2021-22.

    Significance of NLMC

    • The government would be able to generate substantial revenues by monetizing unused and under-used assets.
    • The new corporation will also help carry out monetization of assets belonging to public sector firms that have closed or are lined up for a strategic sale.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Centre and RBI must rely on unconventional policies to manage finances better

    Context

    Amid Ukraine crisis and high oil prices, the larger concern is how the government and the RBI will navigate this period at a time of record government borrowings, and prevent domestic interest rates from hardening.

    The Triffin paradox in current context

    • It is ironic that even as emerging economies running current account deficits are getting punished by a depreciating currency and a hardening of interest rates, we are witnessing the US dollar appreciating and US treasuries strengthening.
    • The most common argument for such a macroeconomic paradox is named after the economist Robert Triffin (the Triffin Paradox).
    •  It postulates that the US current account deficit is purely a reflection of the US supplying large amounts of dollars to fulfil the world’s demand.
    • In other words, central banks across the world must build up claims on the US to back their domestic money growth.

    Dollar’s dominance

    • Former US Federal Reserve Chairman Bernanke even extended this argument in 2005 to the “saving glut” proposition by espousing that emerging economies were accumulating foreign exchange reserves in dollars, and diverting domestic savings to buy US treasuries.
    • There are several counter arguments to this view that effectively state that the dominance of the US dollar is inevitable in the global financial architecture, and it is purely a fault of emerging market economies.

    Need for the unconventional tools to avoid the disruption by government borrowing

    This can be done in the following ways

    1] Spread the borrowing over four quarters after taking real-time view of disruption

    • Every year, the government front-loads its large borrowing programme by completing 60 per cent of the borrowings in the first half of the year.
    • This time, the RBI and the government may take a real-time view of disruptions and spread the borrowings over four quarters, keeping the initial two quarters light.
    • The borrowing programme can also be announced as per a quarterly schedule and there could be even two auctions during the week.
    • These steps could smoothen out the non-disruptive elements in government borrowings.

    2] Reconfigure the borrowing program

    • For example, as rates move up, banks tend to prefer short-term investments while insurance companies, provident funds and others prefer longer-term investments.
    • Given this, the borrowing schedule can be reconfigured with a higher proportion of short-and medium-tenor securities being offered in the initial months, while pushing back the longer tenor securities to the second half of the year.

    3] Push Small Savings Schemes

    • Third, small savings collections have significantly exceeded budget estimates.
    • The government could think of giving a push to small savings schemes such as the Sukanya Samriddhi Yojana (SSY).
    • The SSY has witnessed the registration of 2.82 crore girl children in the seven years since its inception in 2015, leaving enough room for further mop-up.
    • The newly opened accounts may even be given an enhanced savings limit in the first year to catch up for the years lost for these new additions.

    4] Listing of LIC

    • LIC currently holds around Rs 23.5 trillion worth of government bonds, higher than even than the RBI.
    • LIC’s G-sec holding is around 19 per cent, while in comparison the banking system’s ownership stands at around 38 per cent.
    • Thus LIC’s listing should augur well for the bond market as the insurance behemoth may have to deploy a greater share of inflows in safer avenues domestically.
    • This is a plausible option as banks may have to readjust their deposits into credit as the economic recovery gains momentum.

    Conclusion

    Rising oil prices have placed policymakers in an unenviable position. If higher oil prices are fully passed through, it will result in higher inflation and hence higher rates as a consequence.  In such a scenario it is best to follow the first option by using unconventional policy measures.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Stagflation’ in India

    Reports suggest that crude oil prices soared and touched almost $140 per barrel mark amid Russian invasion of Ukraine. This has posed a risk of causing Stagflation in India.

    What is Stagflation?

    • Stagflation is a stagnant growth and persistently high inflation. It, thus, describes a rather rare and curious condition of an economy.
    • Iain Macleod, a Conservative Party MP in the United Kingdom, is known to have coined the phrase during his speech on the UK economy in November 1965.
    • Typically, rising inflation happens when an economy is booming — people are earning lots of money, demanding lots of goods and services and as a result, prices keep going up.
    • When the demand is down and the economy is in the doldrums, by the reverse logic, prices tend to stagnate (or even fall).
    • But stagflation is a condition where an economy experiences the worst of both worlds — the growth rate is largely stagnant (along with rising unemployment) and inflation is not only high but persistently so.

    How does one get into Stagflation?

    • The best-known case of stagflation is what happened in the early and mid-1970s.
    • The OPEC (Organisation of Petroleum Exporting Countries), which works like a cartel, decided to cut crude oil supply.
    • This sent oil prices soaring across the world; they were up by almost 70%.
    • This sudden oil price shock not only raised inflation everywhere, especially in the western economies but also constrained their ability to produce, thus hampering their economic growth.
    • High inflation and stalled growth (and the resulting unemployment) created stagflation.

    Is India facing stagflation?

    • In the recent past, this question has gained prominence since late 2019, when retail inflation spiked due to unseasonal rains causing a spike in food inflation.
    • In December 2019, it was also becoming difficult for the government to deny that India’s growth rate was witnessing a secular deceleration.
    • As revised estimates, released in January end, now show, India’s GDP growth rate decelerated from over 8% in 2016-17 to just 3.7% in 2019-20.
    • However, the answer to this question in December 2019 was a clear no.
    • For one, in absolute terms, India’s GDP was still growing, albeit at a progressively slower rate.

    Why this is a cause of concern?

    • Russia is the world’s second-largest oil producer and, as such, if its oil is kept out of the market because of sanctions, it will not only lead to prices spiking, but also mean they will stay that way for long.
    • While India is not directly involved in the conflict, it will be badly affected if oil prices move higher and stay that way.
    • India imports more than 84% of its total oil demand. At one level, that puts into perspective all the talk of being Atmanirbhar (or self-reliant).
    • Without these imports, India’s economy would come to a sudden halt — both metaphorically as well as actually.

    Expected impact on Indian Economy

    • Higher inflation would rob Indians of their purchasing power, thus bringing down their overall demand.
    • In other words, people are not demanding enough for the economy to grow fast.
    • Private consumer demand is the biggest driver of growth in India.
    • Such aggregate demand — the monetary sum of all the soaps, phones, cars, refrigerators, holidays etc. that we all spend on in our personal capacity — accounts for more than 55% of India’s total GDP.
    • Higher prices will reduce this demand, which is already struggling to come back up to the pre-Covid level.
    • Fewer goods and services being demanded will then disincentivise businesses from investing in new capacities, which, in turn, will exacerbate the unemployment crisis and lead to even lower incomes.

    Back2Basics: Inflation and its impact

    • Depression: It is Economic depression is a sustained, long-term downturn in economic
    • Deflation: It is the general fall in the price level over a period of time.
    • Disinflation: It is the fall in the rate of inflation or a slower rate of inflation. Example: a fall in the inflation rate from 8% to 6%.
    • Reflation: It is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy back up to the long-term trend, following a dip in the business cycle. It is the opposite of disinflation.
    • Skewflation: It is the skewed rise in the price of some items while remaining item prices remain the same. E.g. Seasonal rise in the price of onions.
    • Stagflation: The situation of rising prices along with falling growth and employment, is called stagflation. Inflation accompanied by an economic recession.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How to handle impact of Ukrainian crisis on India’s energy sector

    Context

    The Ukraine crisis will affect India’s energy landscape in many ways. This article analyses the impact and suggest the policy measures.

    The trajectory of oil prices

    • The inflation-adjusted price of Brent crude is $83/bbl (as of writing, the nominal price is $116 / bbl), which is lower than the peak of $145/ bbl in 2008 and the average price that year of $100/bbl.
    •  In other words, prices could rise much further and we would still not be in uncharted waters.
    • Factors affecting prices: The price trajectory will depend on the duration of the conflict, its impact on global energy demand, countervailing supply measures (for example, drawdown of strategic reserves, diversion of US LNG supplies to Europe, the Iranian nuclear deal which, if signed, could release up to 1 mbd of Iranian crude into the market) and whether in all this mayhem, the pipeline infrastructure currently feeding Russian gas into Europe remains operational.
    • Impact on India’s earnings: Our earnings from petroleum products (diesel, petrol, naphtha) will be adversely impacted.
    • In 2021, these products generated $39 billion in revenue and at 14 per cent, they accounted for the highest share of export earnings.

    Impact on India’s energy assets in Russia

    • ONGC has a 26 per cent stake in the Vankor oil field, a 20 per cent stake in the Sakhalin-1 LNG/oil export complex.
    • All these holdings have eroded substantially in value.
    • In India, Rosneft (the Russian national oil company) operates the 20 mtpa refinery in Vadinar through Nayara Energy.
    • Nayara is not sanctioned but the traders of crude/products might worry about transacting with an Indian company owned by a sanctioned Russian entity.

    Four emergent energy trends that would affect India

    • 1] Energy ties of Russia and China: Only last week, for instance, Gazprom signed off on an agreement to build a second gas pipeline to China christened “Power of Siberia 2”.
    • The “Power of Siberia 1” pipeline has been pumping gas into China since 2019.
    • 2] Emergence of US as second largest producer: The emergence of the US as the largest producer of oil in the world and potentially the largest exporter of LNG.
    • It has the capacity to blunt the impact of a supply shortfall but as it is controlled by profit-maximising private corporates.
    • 3] The ability of Saudi Arabia to swing the crude oil market: It is the one member of OPEC plus with significant spares, low cost, producible capacity (approx 3 mbd) of crude oil.
    • The US has pressured Saudi to bring this volume into the market but they have, as yet, not buckled.
    • 4] China’s dominance over rare earth metals: The chokehold of China over the rare earths, minerals and components that are required to effect the transition to a clean energy system.

    Suggestions for India

    • 1] Take into account uncertainty: Frame the polic around the expectation of continuing volatility.
    • 2] Strategic reserves: Build up strategic reserves to safeguard against the unexpected.
    • 3] Transnational pipelines: Revive conversations with Turkmenistan and Iran about a transnational gas pipeline.
    • 4] Reduce dependence on China for minerals and components required for the transition to clean energy: Fast forward efforts to decouple the supply chain dependence on China for the minerals and components required for the clean energy transition.
    •  And, finally bring in psychologists to get a better fix on the logic that drives the decisions of the energy autocrats in Russia, Saudi Arabia and China.

    Conclusion

    The Ukraine crisis throws up many learnings. But one needs particular emphasis. It is not enough to read the tea leaves of supply, demand and geopolitical trends to understand the trajectory of the energy market.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Hike in crude oil prices and its impact on India

    Context

    The Russia-Ukraine conflict will impact India’s economy through several channels. The first order impact, emanates from the negative terms of trade shock from higher commodity prices, particularly oil.

    • Crude prices have surged well past a $110/barrel and there is a growing expectation that, as the conflict gets more entrenched, crude could remain elevated for much longer and average close to $100/barrel in 2022, vis-a-vis $70/barrel in 2021.

    Why crude oil price is increasing?

    Limited Supply:

    • Major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic.
    • Saudi Arabia pledged extra supply cuts in February and March 2020 following reductions by other members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
    • In early January 2021, the OPEC and Russia (as OPEC+) agreed to cut back on oil production to increase prices.

    Rising Demand:

    • The production and rollout of vaccines for Covid-19 and the rising consumption post the Covid lockdowns last year have both led to a revival in international crude oil prices.

    Geopolitical reasons

    • Geopolitical tension has risen between Russia, which is the second largest oil producer in the world, and neighbouring Ukraine.
    • In January, there were drone attacks on oil facilities in UAE, another major oil producer.
    • An outage on a major oil pipeline linking Saudi Arabia and Turkey further added to the pressures.

    How it will impact India?

    • Current Account Deficit: The increase in oil prices will increase the country’s import bill, and further disturb its current account deficit (excess of imports of goods and services over exports).
      • According to estimates, a one-dollar increase in crude oil price increases the oil bill by around USD 1.6 billion per year.
    • Inflation: The increase in crude prices could also also further increase inflationary pressures that have been building up over the past few months.
      • This will decrease the space for the monetary policy committee to ease policy rates further.
      • The government had hiked central taxes on petrol and diesel by Rs. 13 per litre and Rs. 11 per litre in 2020 to boost revenues amid lower economic activity.
    • Fiscal Health: If oil prices continue to increase, the government shall be forced to cut taxes on petroleum and diesel which may cause loss of revenue and deteriorate its fiscal balance.
      • The growth slowdown in the last two years has already resulted in a precarious fiscal situation because of tax revenue shortfalls.
      • The revenue lost will erode the government’s ability to spend or meet its fiscal commitments in the form of budgetary transfers to states, payment of dues and compensation for revenue shortfalls to state governments under the goods and services tax (GST) framework.

    Why high growth impact on fiscal space leads to a greater hit to demand and growth?

    • The growth impact will manifest through constraints on fiscal space, household purchasing power being impinged and firm margins coming under pressure.
    • Why does marginal propensity to consume matter? The quantum of the growth impact will depend on how the shock is distributed across the fiscal, households and firms because of the different marginal propensities to consume.
    • For example, the excise duty cuts last November have already absorbed about one-third of the shock from oil (0.4 per cent of GDP).
    • The cost of this, however, is commensurate pressures on fiscal expenditures and growth, agnostically assuming a fiscal multiplier of 1.
    • In contrast, the marginal propensity to consume/invest out of income/earnings is typically lower than 1 for households/firms.
    • So, the greater the fraction of the shock absorbed on the fiscal, the greater the hit to demand and growth. 

    Way forward

    1] Let the rupee reach the new equilibrium

    • The widening of the CAD and associated BoP pressures will create some depreciation pressures on the rupee.
    • More fundamentally, a persistent negative terms of trade shock will argue for a weaker equilibrium real effective exchange rate.
    • Policymakers should let the rupee reach this new equilibrium – albeit in a gradual and non-disruptive manner – and not prevent this adjustment because it will facilitate the necessary “expenditure switching” to reduce imports, boost exports and help narrow an elevated CAD.

    2] Pragmatic fiscal policies

    • Cutting excise duties would buffer the impact on households and protect consumption, but potentially result in a larger hit to demand by shrinking fiscal space to spend.
    • If the government doesn’t cut duties, it has resources that can potentially be used to more directly target affected households at the bottom of the pyramid.
    • But this will mean higher retail prices that can harden inflationary expectations, increasing the challenges for monetary policy.
    • Finally, policymakers could always cut duties, not cut spending and let the deficit widen commensurately — effectively pushing out some of the terms of trade costs to the future — but negative surprises on the fiscal during periods of heightened macro uncertainty can generate significantly risk premia in markets.
    • All told, the fiscal will confront several trade-offs, and should try avoiding corner solutions.
    • What should be clear is that as soon as markets begin to stabilise, authorities must plough ahead with planned asset sales/disinvestment to create more fiscal headroom, without trying to perfectly time the market.

    3) Reduce the dependence

    • India has proposed Oil Buyer’s club. This would be a grouping of India, China, Japan and South Korea. The objective is to reduce the dependence on OPEC, have better bargains, increase the imports of crude oil imports from USA etc
    • It was put forward by Mani Shankar Ayyar in 2005
    • Create a stabilization fund or reserve account – Thailand, UK etc

    Conclusion

    A persistent adverse supply shock is complicated and challenging to respond to, and the new equilibrium will inevitably need some combination of a weaker rupee, higher rates, and judicious fiscal management.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

    Back2Basics: What is a fiscal multiplier?

    • The fiscal multiplier measures the effect that increases in fiscal spending will have on a nation’s economic output, or gross domestic product (GDP).
    • Fiscal multipliers are important because they can help guide a government’s policies during an economic crisis and help set the stage for economic recovery.

    What is Marginal Propensity to Consume?

    • In economics, the marginal propensity to consume (MPC) is defined as the proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it.
    • Marginal propensity to consume is a component of Keynesian macroeconomic theory and is calculated as the change in consumption divided by the change in income.
    • MPC varies by income level. MPC is typically lower at higher incomes.

  • Why the SilverLine Project makes sense for Kerala

    Context

    The SilverLine Project to be built by the government of Kerala will link Thiruvananthapuram in the south to Kasargode in the north.The project has received its share of criticism, much of it from political quarters, but also some academic sections.

    Need for high-speed rail in Kerala

    • Saturated road network: For Kerala, with its saturated road network, the building of a fast, environmentally-sustainable high-speed rail link must surely be seen as a sound governance response.
    • Indeed, a study of INDC (Intended Nationally Determined Contribution) plans under the Paris Climate Agreement is instructive in this context.
    • Low-cost emission option: The EU study on mobility notes that HSR is the least-cost emission option among all modes of long-distance transportation.

    The arguments against the project

    • Critics have put forward three principal lines of argument, namely, its alleged adverse environmental impact, financial unviability, and technical unsuitability.
    • Environmental impact: The most compelling environmental issue before us is climate change.
    • Building capacities now to achieve a carbon net-neutral world over the next three to four decades is a core aspect of the national strategy of all nations.
    • In this context, the SilverLine project scores high with respect to India’s own climate objective of achieving net-zero emissions by 2070.
    • Let us recall the driving forces behind Japan’s decision to develop the Shinkansen.
    • In the context of the global oil crisis, energy-insecure Japan wanted to develop a public transportation system that was energy-efficient and would also address national concerns with respect to imbalanced regional growth.
    • After the Kyoto Protocol was signed, more efforts were made to increase the speed of the various series of Shinkansen to meet the objectives of energy efficiency and CO2 reductions.
    • Financial viability: Large-scale infrastructure projects are not based on short-term financial viability considerations alone.
    • When the London Underground was conceived, it was not considered financially viable.
    • Today, London’s economic activities are inconceivable without it.
    • Green technologies that we consider cheaper than fossil fuel technologies were not initially financially viable, and were unable to survive without government subsidies.

    Conclusion

    There are abundant international examples of the role played by large capital-intensive infrastructure projects in the transformation of the town and country, regions, and nations.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • GST revenues cross 1.3 lakh crore in Feb

    The Gross Goods and Services Tax (GST) revenue in February was 26% higher than the pre-pandemic levels at â‚č1,33,026 crore.

    What is GST?

    • GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
    • The Goods and Service Tax 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.
    • It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
    • 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.

    Answer this PYQ in the comment box:

    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 (CSP 2015):

    (a) Contingency Fund of India

    (b) Public Account

    (c) Consolidated Fund of India

    (d) Deposits and Advances Fund

     

    [wpdiscuz-feedback id=”91v2rbtz17″ question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

    What are the components of GST?

    There are three taxes applicable under this system:

    1. CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    2. SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    3. 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.
    • Petrol is not under GST, which goes against the ideals of the unification of commodities.

    Take a look at the share of GST in government earnings for the previous fiscal:

    UPSC can ask about the majority component of the Revenue Receipts of the govt. See how Corporate tax is nearing the GST revenues.

    Do you think it will surpass GST revenue when the economy is fully recovered?

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • In news: Bhakra Beas Management Board (BBMB)

    Political parties in Punjab are up in arms over the Centre’s decision to amend the rules regarding appointments to two key positions on the Bhakra Beas Management Board (BBMB).

    What is BBMB?

    (a) Origin

    • The genesis of BBMB lies in the Indus Water Treaty signed between India and Pakistan in 1960.
    • Under this, waters of three eastern rivers— Ravi, Beas and Sutlej — were allotted to India for exclusive use while Indus, Chenab and Jhelum rivers were allocated to Pakistan.
    • In India, a master plan was drawn to harness the potential of these rivers for providing assured irrigation, power generation and flood control.
    • Bhakra and Beas projects form a major part of this plan and were established as a joint venture of the then undivided Punjab and Rajasthan.

    (b) Establishment

    • Following the reorganization of Punjab on November 1, 1966, and the creation of the state of Haryana, the BBMB was constituted under Section 79 of the Punjab Reorganisation Act, 1966.
    • The administration, maintenance and operation of Bhakra Nangal Dam project was handed over to Bhakra Management on October 1, 1967.
    • On May 15, 1976, when the Beas Projects Works were completed and handed over, the Bhakra Management Board was renamed as Bhakra Beas Management Board (BBMB).
    • Since then, BBMB regulates supply of water and power to Punjab, Haryana, Rajasthan, Himachal Pradesh, Delhi and Chandigarh.

    What is the constitution of the BBMB management?

    • The BBMB management includes a chairperson and two whole time members who are from the partner states of Punjab and Haryana.
    • They are designated as Member (Power) and Member (Irrigation) from Punjab and Haryana, respectively.
    • There is representation from each member state including Rajasthan and Himachal Pradesh as nominated by the respective state governments.
    • The total strength of BBMB is about 12,000 employees and out of these 696 are Group A officers and are posted from the partner states.

    What changes have been made to the BBMB rules?

    • The GoI issued a notification on February 23, 2022 to amend the BBMB Rules 1974, thereby changing the criteria for the selection of whole-time members of the Board.
    • New rules specify technical qualifications for the appointments and pave for the appointment of the members from across India and NOT ONLY from Punjab and Haryana.

    What has been the objection to the new rules?

    • The opposition to the new rules has come from within the engineers’ fraternity, farmers as well as the political parties of Punjab.
    • It is being labeled as an attack on the federal structure of the country.
    • The engineers have pointed out that hardly any engineer would qualify for appointment as per the new specifications.

     

    Back2Basics: Indus Waters Treaty, 1960

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

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Land protests over Deocha Pachami Coal Block

    The West Bengal government’s ambitious Deocha Pachami coal block mining project in Birbhum district has run into hurdles over land acquisition and other issues.

    Deocha Pachami Coal Block

    • The State government is planning to start mining at the Deocha Pachami coal block, considered to be the largest coal block in the country with reserves of around 1,198 million tonnes of coal.
    • It is spread over an area of 12.31 sq. km, which is around 3,400 acres.
    • There are around 12 villages in the project area with a population of over 21,000, comprising Scheduled Castes and Scheduled Tribes.

    Why are locals upset?

    • The project is facing protests over land acquisition of which a significant part is forest land.
    • Locals, mostly Santhal tribals, have close affinity with the land, with forests and waterways, and rely on it for their needs.
    • The tribals were harassed and had been arrested under false and serious charges for protesting.
    • Also, the project details have not yet been made public; and the environment clearance is awaited.

    Back2Basics:

    Coal

    • This is the most abundantly found fossil fuel. It is used as a domestic fuel, in industries such as iron and steel, steam engines and to generate electricity. Electricity from coal is called thermal power.
    • The coal which we are using today was formed millions of years ago when giant ferns and swamps got buried under the layers of earth. Coal is therefore referred to as Buried Sunshine.
    • The leading coal producers of the world include China, US, Australia, Indonesia, India.
    • The coal-producing areas of India include Raniganj, Jharia, Dhanbad and Bokaro in Jharkhand.
    • Coal is also classified into four ranks: anthracite, bituminous, sub-bituminous, and lignite. The ranking depends on the types and amounts of carbon the coal contains and on the amount of heat energy the coal can produce.