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Type: Explained

These Newscards correspond to the explained section of various newspapers. They become immensely important for both prelims and mains and special attention needs to be paid to them

  • Explained: Fiscal Marksmanship

    Over the past few years, many have questioned the government’s fiscal marksmanship.

    What is fiscal marksmanship?

    • Fiscal marksmanship essentially refers to the accuracy of the government’s forecast of fiscal parameters such as revenues, expenditures and deficits etc.
    • In other words, if the difference between what the government projected as the likely tax revenues in the Budget and the actual figures a year later is large then it reflects poor fiscal marksmanship.
    • In the Indian context, this term gained popularity after Raghuram Rajan, then India’s Chief Economic Advisor stressed on fiscal marksmanship in the Economic Survey for the year 2012-13.
    • He had defined fiscal marksmanship as “the difference between actual outcomes and budgetary estimates as a proportion of GDP”.

    Why does fiscal marksmanship matter?

    • The salience of Budget numbers lies in their credibility.
    • The central purpose of publicly disclosing the Budget or the annual financial statement in a democracy and seeking approval from the legislature is to make the policymaking and governance transparent and participatory.
    • Everyone knows that Budget numbers are forecasts and estimates, and as such, unlikely to tally exactly with the actual numbers a year later.
    • But there is an underlying belief among people that when the government states, say, that its revenues will grow by 12% or that its fiscal deficit will remain within the FRBM Act’s mandate as it is based on genuine calculations.
    • However, if these fiscal forecasts turn out to be way off the mark repeatedly, it will undermine the credibility of the Budget numbers and indeed the Budget presentation itself.

    Why is India’s fiscal marksmanship being questioned?

    Typically, the fiscal marksmanship tends to get dented every time the economy faces a bump during the financial year.

    • For instance, as a result of the extent of the Global Financial Crisis in 2008, budget forecasts in the ensuing years did take a hit.
    • The latest trigger has been the wide discrepancy between what the last couple of budgets — first the interim budget for 2019-20 (presented in February 2019) and then the full budget for 2019-20 (presented in July 2019).
    • It expected the nominal GDP growth to be in 2019-20 and what the First Advance Estimates (FAE), released by the Ministry of Statistics and Programme Implementation in January 2020.
    • For instance, the July 2019 Budget expected nominal GDP to grow by 12% in 2019-20 but the FAE expect the nominal GDP to grow by just 7.5% (which by the way is a 42-year low).
    • Since all budget calculations are based on the nominal GDP, it is expected that this wide variance in nominal GDP will reflect across the board in the coming Budget.

    Impact on revenue

    • The government’s revenues are unlikely to grow anywhere close to the last Budget’s expectation.
    • Indeed, the revenue shortfall is expected to be anywhere between Rs 2 lakh crore to Rs 5 lakh crore.
    • As a result, either the fiscal deficit will overshoot from the budgeted number or the expenditure numbers will be much lower than promised.

    Why has fiscal marksmanship worsened?

    • As mentioned earlier, when an economy’s growth slows down (or picks up) sharply within a year, it is possible that the fiscal forecasts for that year go down (or up) substantially.
    • However, such changes do not happen too often.
    • In the recent past, however, there is one structural change that appears to be contributing to poor fiscal forecasts by the government.
    • This structural change was the government’s decision in January 2017 to advance the presentation of the Union Budget by a whole month.
    • Accordingly, the Union Budget for 2017-18 was presented on February 1 instead of the last working day of February (28th or 29th), as was the norm till then.
    • It meant that the First Advance Estimates, which used to come by January end (after taking into account the economic activity of the first three quarters of the financial year), had to be brought out by the start of January.
    • This, in turn, essentially meant that the estimate of the key nominal GDP data for the current year — on the base of which next year’s nominal GDP and other estimates were to be made — had to be made using the first two quarters of the current fiscal year.

    Why didn’t the government course-correct and project slower economic growth in July 2019 when it presented the full Budget for 2019-20?

    • It is unclear why this was not done. But could be two or three possible reasons.
    • One, the FM may have favoured continuity over the Interim Budget estimates instead of providing a starkly different set of estimates.
    • Two, and a related reason, could be that the government did not have enough time to make the adjustment because it may have required redoing the whole Budget afresh.
    • Or third, because perhaps the government did not recognise the severity of the economic slowdown that has been underway.

  • Explained: Why are there more men than women in the field of STEM?

    Across the world, there are more men who are active in science, technology, engineering and medicine (STEM) than women. Of the 866 Nobel winners so far, only 53 have gone to women.

    Sociology behind the gender-divide

    • Research shows that when men and women apply for jobs — be in the labour market, or in places where high level qualifications are demanded, men candidates engage in self-promotion, and are boastful while equally qualified women are more ‘modest’ and ‘undersell’ themselves.
    • Even in groups and situations where men and women are present as colleagues, the views of women are either ignored or listened to less seriously than those of men.
    • As a result, women tend to underestimate their ability relative to men, especially in public settings, and negotiate less successfully.

    Why this imbalance?

    The authors suggest three socio-psychological reasons, namely:

    1. masculine culture
    2. lack of sufficient early exposure to computers, physics and related areas compared to boys in early childhood and
    3. gender gap in self-efficacy

    Stereotypes and role models

    I] Masculine culture

    • The masculine culture is due to stereotyping that men are fitter for certain jobs and skills than women, and that women are more ‘delicate’, ‘tender’ and thus unfit for ‘hard’ jobs.
    • In addition, there are not enough female role models whom women may admire and follow.

    II] Lack of exposure

    • The lack of exposure in early childhood to certain fields and the supposed stereotyping of computer field practitioners as ‘nerds’ with social awkwardness would seem to have played a role from women shying away into other fields.

    III] Gender gap in self-efficacy

    • The ‘gender gap in self-efficacy’ appears to have arisen as a result of the above two, and leads to a worry in girls’ and women’s minds as to ‘whether I am really only fit for certain ‘soft’ fields and jobs or a feeling of diffidence.
    • This is clearly a reflection and product of masculine culture.
    • But then, even when we turn to life sciences, where both men and women compete for positions and career advancements in universities and research labs, this gender disparity is glaring.

    India is no better

    • The men rule roosts here too in India. India has been a patrilineal society with the notion that women need not take on jobs, and that this notion has only recently been revised.
    • Women form only 10-15% of STEM researchers and faculty members in the IITs, CSIR, AIIMS and PGIs.
    • In private R & D labs, there are very few women scientists.

  • Explained: The Kashmir Pandit tragedy

     

    It is 30 years since the “exodus” from the Valley of its minority Hindu Kashmiri Pandit community.

    The run-up: 1980s to 1990

    • Sheikh Abdullah had died in 1982, and the leadership of the National Conference passed on to his son Farooq Abdullah, who won the 1983 election.
    • But within two years, the Centre broke up the NC, and installed dissident Ghulam Mohammed Shah as Chief Minister. This led to huge disaffection and political instability.
    • The Jammu & Kashmir Liberation Front (JKLF) stepped up its activities, and the hanging of the militant leader Maqbool Bhat in 1984 added to the sense of foreboding.
    • In 1986, after the Rajiv Gandhi government opened the Babri Masjid locks to enable Hindus to offer prayers there, ripples were felt in Kashmir too.
    • In Anantnag, the constituency of then Congress leader Mufti Mohammad Sayeed, there was a series of attacks on Hindu temples, and shops and properties of Kashmiri Pandits, blamed on separatist and secessionists.
    • Pandits had begun to be targeted. Eminent persons of the community were being shot dead.

    The night of January 19, 1990

    • Matters came to a head on January 19. By then, the Farooq Abdullah government had been dismissed and Governor’s Rule imposed.
    • According to accounts published by many eminent Kashmiri Pandits, there were threatening slogans over loudspeakers from mosques, and on the streets.
    • Speeches were made extolling Pakistan and the supremacy of Islam, and against Hinduism. Finally, the Kashmiri Pandit community decided to leave.

    The Gawkadal Massacre

    • On January 20, the first stream began leaving the Valley with hastily packed belongings in whatever transport they could find. A second, larger wave left in March and April, after more Pandits were killed.
    • On January 21, the CRPF gunned down 160 Kashmiri Muslim protesters at the Gawkadal Bridge, which has come to be known as the worst massacre in the long history of the conflict in Kashmir.
    • The two events — the flight of the Pandits and the Gawkadal massacre — took place within 48 hours.

    How many Pandits left?

    • According to some estimates, notably by the Kashmiri Pandit Sangharsh Samiti (KPSS), of 75,343 Kashmiri Pandit families in January 1990, more than 70,000 fled between 1990 and 1992 and continued until 2000.
    • The KPSS has placed the number of Kashmiri Pandits killed by militants from 1990 to 2011 at 399, the majority during 1989-90.
    • Some 800 families have remained in the Valley through these three decades.

    Role of the administration

    • The other contentious question about the exodus is the role played by the administration, and more specifically that of the J&K Governor, Jagmohan.
    • Newly appointed, he had arrived in Srinagar on January 19.
    • The Kashmiri Muslim view of the exodus is that he encouraged the Pandits to leave the Valley and thus gave a communal colour to what was until then a non-religious Kashmiri cause.
    • The Kashmiri Hindu view is that this is a disingenuous interpretation.
    • They believe that Kashmiri Muslims, with whom they had lived amicably for centuries, drove them out with a vengeance in a frenzy of Islamism that they could not have imagined even months earlier.
    • The truth, many commentators have concluded, may have been somewhere in the middle.

    The question of return

    • Those who had means rebuilt their lives elsewhere in the country — Delhi, Pune, Mumbai and Ahmedabad have Pandit populations, also Jaipur and Lucknow — or went abroad.
    • The fleeing Pandits did not think they would never return to the Valley. But as the situation in Kashmir spiraled into a full-blown militancy, return began to look remote if not impossible.
    • The longing to return to the Valley did not diminish over the years, though it may have become more an idea than a real ambition.
    • Successive governments have promised that they will help this process, but the situation on the ground in Kashmir has meant this remains only an intention.
    • There is an acute realization in the community that the Valley is no longer the same that they left behind in 1990.
    • In many cases, their properties were either immediately vandalised or sold quickly by the owners to Kashmiri Muslims. Many fell into disrepair.

  • Explained: What new monsoon dates mean

     

    The India Meteorological Department (IMD) had decided to revise the normal onset and withdrawal dates for the monsoon in some parts of the country from this year.

    Onset of Monsoon

    • The four-month southwest monsoon season, which brings as much as 70 per cent of the country’s annual rainfall, officially begins on June 1, with the onset over Kerala, and ends on September 30.
    • It takes about a month and half after onset on the Kerala coast to cover the entire country; and about a month, beginning from the northwestern parts of the country on Sept. 1 to withdraw completely.
    • Although the June 1 date for the onset of the monsoon on the Kerala coast is unlikely to be changed, the dates for onset in many other parts of the country are expected to be revised.
    • Mumbai, for example, expects to start getting rain from June 10 the revision is likely to push this date back by a few days.
    • Effectively, the monsoon is now expected to have later arrival and withdrawal dates in most parts of the country.

    Why was this revision needed?

    • The main reason for the revision in the normal dates is the changes in precipitation patterns that have been taking place over the last many years.
    • In the last 13 years, for example, only once has the onset over the Kerala coast happened on June 1.
    • While two or three days of earlier or later onset falls within the yearly variability in several years the onset happened five to seven days late.
    • Similarly, the commencement of withdrawal has happened in the first week of September only twice during this period, and last year, the withdrawal started as late as October 9 — and was completed in around just a week.

    Recent peculiarity with the exam

    • One of the significant changes being noticed is that rainfall is getting increasingly concentrated within a narrow band of days within the monsoon season.
    • So, there are extremely wet days followed by prolonged periods of dry days.
    • IMD data show that over several previous years, nearly 95 per cent of monsoon precipitation in 22 major cities of the country had happened over a period of just three to 27 days.
    • Delhi, for example, had received almost 95 per cent of its monsoon rainfall over just 99 hours. And half of Mumbai’s monsoon rain had fallen over just 134 hours, or five and a half days, on average.

    Regional variations

    • Patterns of regional variations in rainfall are also changing
    • Areas that have traditionally received plenty of rainfall are often remaining dry, while places that are not expected to get a lot of monsoon rain have sometimes been getting flooded.
    • Climate change could be one of the factors driving these changes, but there could be other reasons as well.

    What will be the impact of IMD’s move?

    For Farmers

    • The revisions are meant to reflect the changes in precipitation patterns in recent years.
    • New dates will likely nudge farmers in some parts of the country to make slight adjustments in the time of sowing their crops.
    • It would definitely have an impact on our agriculture practices — when to start sowing, when to harvest.
    • So, even if there is a delay in the arrival of monsoon by three to four days over a region, it would not matter much if there is a fairly good rainfall distribution thereafter.
    • The change in dates would affect water management practices as well.

    For Industries

    • The planning that goes to beat the heat — several cities execute heat action plans — just ahead of the monsoon would have to factor in the need to be prepared for longer periods of heat.
    • Rajeevan said many other activities including industrial operations, the power sector, or those using cooling systems, would also need to change their behaviour.
    • The power grid can, for example, have more realistic planning for peak periods of electricity consumption in certain months.

    Way Forward

    • The changed dates are expected to be announced in April, when the IMD makes its first forecast for the monsoon.
    • Agro-meteorologists, however, agree that more than the onset, it is the information about the spatio-temporal distribution of rainfall that will be more helpful for farmers.
    • Ultimately, the change in normal dates of the onset and withdrawal of the monsoon would help people understand when to expect rains, and to plan their activities accordingly.

  • Explained: What is the NIA Act, and why is Chhattisgarh challenging it?

    The Chhattisgarh state govt. moved the Supreme Court against the 2008 National Investigative Agency (NIA) Act, stating it is violative of the Constitution. In its civil suit, the government told the apex court the NIA should have no power over state policing matters.

    What is the NIA Act, 2008?

    • The NIA Act, 2008 governs the functioning of India’s premier counter-terror agency.
    • It was introduced by then home minister P Chidambaram in the wake of the 26/11 Mumbai terrorist attacks and was passed in Parliament with very little opposition.
    • The Act makes the NIA the only truly federal agency in the country, along the lines of the FBI in the United States, more powerful than the CBI.
    • It gives the NIA powers to take suo motu cognizance of terror activities in any part of India and register a case, to enter any state without permission from the state government, and to investigate and arrest people.

    Objections made by CG

    • In its petition, the Chhattisgarh govt. said the Act is “ultra vires the Constitution” and “beyond the legislative competence of the Parliament”.
    • According to the state, the 2008 Act allows the Centre to create an agency for investigation, which is a function of the state police.
    • ‘Police’ is an entry in the State List of the Constitution’s 7th Schedule.
    • The petition says the 2008 Act takes away the state’s power of conducting an investigation through the police, while conferring unfettered, discretionary and arbitrary powers” on the Centre.
    • The provisions of the Act leave no room of coordination and pre-condition of consent, in any form whatsoever, by the Centre from the State govt. which clearly repudiates the idea of state sovereignty as envisaged under the Constitution.

    Changes made to the NIA’s powers last year

    • The 2019 NIA Amendment Act expanded the type of offences that the investigative body could investigate and prosecute.
    • The agency can now investigate offences related to human trafficking, counterfeit currency, manufacture or sale of prohibited arms, cyber-terrorism, and offences under the Explosive Substances Act, 1908.
    • The amendment also enables the central government to designate sessions courts as special courts for NIA trials.
    • The Unlawful Activities (Prevention) Amendment (UAPA), also passed in 2019, allows an NIA officer to conduct raids, and seize properties that are suspected to be linked to terrorist activities without taking prior permission of the DG of Police of a state.
    • The investigating officer only requires sanction from the Director General of NIA.

  • Explained: Article 131, on which Kerala has based its challenge to the CAA

    • The Kerala government moved the Supreme Court against the Citizenship (Amendment) Act becoming the first state to challenge the law.
    • It filed a petition under Article 131 of the Constitution and asked for the law to be declared unconstitutional and in violation of Articles 14 (equality before law), 21 (protection of life and personal liberty) and 25 (freedom of conscience and free profession, practice, and propagation of religion).

    What is Article 131 of the Constitution?

    • The Article vests the Supreme Court with original jurisdiction over disputes occurring between states or between states and the Centre.
    • The original jurisdiction of a court means the power to hear a case for the first time, as opposed to appellate jurisdiction, in which the court reviews the decision of a lower court.
    • Unlike the original jurisdiction under Article 32 (which gives the top court the power to issue writs, etc.), the jurisdiction in Article 131 is exclusive, meaning it is only the Supreme Court which has this authority.
    • Under Article 226, the High Courts too have the power to issue writs, directions etc.

    Original jurisdiction

    • Article 131 reads, “Original jurisdiction of the Supreme Court. — Subject to the provisions of this Constitution, the Supreme Court shall, to the exclusion of any other court, have original jurisdiction in any dispute —

    (a) between the Government of India and one or more States; or
    (b) between the Government of India and any State or States on one side and one or more other States on the other; or
    (c) between two or more States,
    if and in so far as the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends:

    • The said jurisdiction shall not extend to a dispute arising out of any treaty, agreement, covenant, engagement, sanad, or other similar instrument which, having been entered into or executed before the commencement of this Constitution.
    • However they continue in operation after such commencement, or which provides, that the said jurisdiction shall not extend to such a dispute.

    What kinds of disputes are covered under Article 131?

    • In ‘State of Rajasthan vs Union of India’, 1977, the Supreme Court ruled that the existence or extent of a legal right is a precursor before a suit under Article 131 is entertained. But mere wrangles between governments have no place in the scheme of that Article.
    • Similarly, in the 1978 case, ‘State of Karnataka vs Union of India’, which involved the Centre’s authority to order an inquiry into a state Chief Minister’s conduct, jurisdiction under Article 131 was held valid.
    • In the present case filed by Kerala, central legislation (CAA) is being challenged. In 2011, a two-judge Supreme Court Bench in ‘Madhya Pradesh v Union of India’ had held such a suit was not maintainable.
    • Later in 2013, another two-judge Bench in ‘State of Jharkhand v State of Bihar and Another’ disagreed with the previous verdict and referred the matter to a larger Bench. Kerala’s plaint relies on the 2013 verdict.

  • Police Commissionerate System

    The UP Cabinet has approved the Commissionerate system of policing for state capital Lucknow, and Noida.

    The Police Commissionerate System

    • The system gives more responsibilities, including magisterial powers, to IPS officers of Inspector General of Police (IG) rank posted as commissioners.
    • Under the 7th Schedule of the Constitution, ‘Police’ is under the State list, meaning individual states typically legislate and exercise control over this subject.
    • In the arrangement in force at the district level, a ‘dual system’ of control exists, in which the Superintendent of Police (SP) has to work with the District Magistrate (DM) for supervising police administration.
    • At the metropolitan level, many states have replaced the dual system with the commissionerate system, as it is supposed to allow for faster decision-making to solve complex urban-centric issues.

    Additional powers to Police

    • In this system, the Commissioner of Police (CP) is the head of a unified police command structure, is responsible for the force in the city, and is accountable to the state government.
    • The office also has magisterial powers, including those related to regulation, control, and licensing.
    • The CP is drawn from the Deputy Inspector General rank or above, and is assisted by Special/Joint/Additional/Deputy Commissioners.

    Where is the system in force?

    • Previously, only four cities had the system: Kolkata, Mumbai, Hyderabad and Chennai.
    • However, with rapid urbanisation, states felt an increasing need to replicate the system in more places.
    • The sixth National Police Commission report, which was released in 1983, recommended the introduction of a police Commissionerate system in cities with a population of 5 lakh and above, as well as in places having special conditions.
    • Over the years, it has been extended to numerous cities, including Delhi, Pune, Bangalore and Ahmedabad. By January 2016, 53 cities had this system, a PRS study said.
    • Depending on its success, the policing system may gradually be implemented in other districts as well.

  • Explained: Doctrine of ‘Presumption of Constitutionality’

    Recently the Supreme Court declined urgent hearing on a plea seeking to declare the CAA as constitutional and said that there was already a “presumption of constitutionality” to a law passed by Parliament.  CJI has said that the court’s role was to examine the validity, and not declare a law constitutional.

    Doctrine of Presumption of Constitutionality

    • The term ‘presumption of constitutionality’ is a legal principle that is used by courts during statutory interpretation — the process by which courts interpret and apply a law passed by the legislature, such as Parliament.
    • In the 1992 Supreme Court case ‘ML Kamra v New India Assurance’, Justice K Ramaswamy said: “The court ought not to interpret the statutory provisions, unless compelled by their language, in such a manner as would involve its unconstitutionality.
    • The legislature of the rule making authority is presumed to enact a law which does not contravene or violate the constitutional provisions.
    • Therefore, there is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the Constitution.
    • If the provisions of a law or the rule is construed in such a way as would make it consistent with the Constitution and another interpretation would render the provision or the rule unconstitutional, the Court would lean in favour of the former construction. ” (“ex facie” meaning ‘on the face’)

    When does this apply?

    • It is a cardinal principle of construction that the Statute and the Rule or the Regulation must be held to be constitutionally valid unless and until it is established they violate any specific provision of the Constitution.
    • Further it is the duty of the Court to harmoniously construe different provisions of any Act or Rule or Regulation, if possible, and to sustain the same rather than striking down the provisions out right.
    • The presumption is not absolute, however, and does not stand when there is a gross violation of the Constitution.

    Limitations to the doctrine

    • A three-judge Bench in ‘NDMC v State of Punjab’ (1996) spoke of the limitations to the doctrine.
    • The Bench observed that the Doctrine is not one of infinite application; it has recognised limitations.
    • The Court has consistently followed a policy of not putting an unnatural and forced meaning on the words that have been used by the legislature in the search for an interpretation which would save the statutory provisions.

  • Explained: The fundamentals of the Indian Economy

    PM Modi highlighted the strong absorbent capacity of the Indian economy while referring to certain fundamentals. He emphasized the strength of these basic fundamentals in absorbing the shocks of ongoing economic slowdown.

    What are the ‘fundamentals of an economy’?

    • The PM has reiterated a phrase of reassurance — underscoring the strong fundamentals of the Indian economy — that has been often used by policymakers in the past when the economy is seen to be faltering.
    • When one talks about the fundamentals of an economy, one wants to look at economy-wide variables such as the overall GDP growth, the overall unemployment rate, the level of fiscal deficit, the valuation of a country’s currency against the US dollar, the savings and investment rates in an economy, the rate of inflation, the current account balance, the trade balance etc.
    • There is intuitive wisdom in looking at these “fundamentals” of an economy when it goes through a tough phase.
    • Such an analysis, when done honestly, can give a sense of how deep the strain in an economy run.
    • It can answer the question whether the current crisis just an exaggerated response to a sectoral problem or is there something more “fundamentally” wrong with the economy that needs urgent attention and “structural” reform.
    • To be sure about the broader health of the economy, one looks at the broader variables. That way, one reduces the chances of getting the diagnosis wrong.

    Their relevance

    • The first advance estimates of national income for the current financial year, released earlier in the week, found that nominal GDP was expected to grow at just 7.5% in 2019-20.
    • This is the lowest since 1978. Real GDP is calculated after deducting the rate of inflation from the nominal GDP growth rate.
    • So, if for argument sake, the inflation for this financial year is 4%, then the real GDP growth would be just 3.5%.
    • Just for perspective, the Union Budget presented in July 2019 expected a real GDP growth of 8% to 8.5% and a nominal GDP growth of 12% to 12.5%, with a 4% inflation level.

    So, what is the current state of the fundamentals?

    The data on most variables that one may call as fundamentals of the Indian economy are struggling.

    • Growth rate — both nominal and real — has decelerated sharply; now trending at multi-decade lows. Gross Value Added, which maps economic growth by looking at the incomes-generated is even lower; and its weakness in across most of the sectors that traditionally generated high levels of employment.
    • Inflation is up but the consolation is that the spike is largely due to transient factors.
    • However, a US-Iran type of conflagration could result is a sharp hike in oil prices and, as such, domestic inflation may rise in the medium term.
    • Unemployment is also at the highest in several decades.According to some calculations, between 2012 and 2018, India witnessed a decline in the absolute number of employed people — the first instance in India’s history.
    • Fiscal deficit, which is proxy for the health of government finances, is on paper within reasonable bounds but over the years, the credibility of this number has come into question. Many, including the CAG, has opined that the actual fiscal deficit is much higher than what is officially accepted.
    • Bucking the trend, the current account deficit, is in a much better state but trade weakness continues as do the weakness of the rupee against the dollar; although on the rupee-dollar issue, a case can be made that the rupee is still overvalued and thus hurting India’s exports.
    • Similarly, while the benchmark stock indices have run up, and grabbed all attention, the broader stock indices like the BSE500 have struggled.

  • Explained: Voting at the GST Council

    • Breaking the tradition of consensus-based decisions in its 37 earlier meetings, the GST Council voted for the first time in its 38th meeting held on December 18.

    GST Council voting rules

    • As per The Constitution (One Hundred and First Amendment) Act, 2016, in case of a voting, every decision of the GST Council has to be taken by a majority of not less than three-fourths of the weighted votes of the members present.
    • The vote of the central government has a weightage of one-third of the total votes cast, and the votes of all the state governments taken together have a weightage of two-thirds of the total votes cast in that meeting.
    • As of now, out of the total 30 states and UTs (excluding J&K), 20 are ruled by the NDA.
    • This essentially means that a vote in the Council could largely be an academic exercise — unless a number of the BJP’s allies switch sides.

    Impacts of imbibing Voting

    • With the precedent of voting now established, consensus at the Council could be challenged again in the future.
    • The rules of voting in the GST Council are such that the odds are stacked in favour of the Centre in the normal course.
    • However, in case of a vote, any disagreements within the ruling coalition at the Centre may bring its support below the three-fourths majority that is needed for the passage of a decision.

    Way Forward

    • Differences of opinion are likely to crop up on proposals to raise rates, especially of the lower slabs, in the future — a concern that made most states rule out an immediate rate hike in the last Council meeting, even as they were in agreement over a broader overhaul of the GST structure.
    • So far, even if states voiced their differences over a proposal in the Council, all decisions had been taken by consensus in the meetings of the GST Council.
    • With a departure from the consensus approach having been made, there could be more instances of voting exercises going forward — especially as revenue-raising measures come up in future meetings.

    Back2Basics

    GST Council

    • The GST Council is a federal body that aims to bring together states and the Centre on a common platform for the nationwide rollout of the indirect tax reform.
    • It is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India.
    • The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
    • The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation.

    How is the GST Council structured?

    • The Goods and Services Tax (GST) is governed by the GST Council. Article 279 (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of the Article 279A.
    • According to the article, GST Council will be a joint forum for the Centre and the States. It consists of the following members:
    1. The Union Finance Minister will be the Chairperson
    2. As a member, the Union Minister of State will be in charge of Revenue of Finance
    3. The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.

    Terms of reference

    • Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as, the goods and services will be subject or exempted from the Goods and Services Tax.
    • They lay down GST laws, principles that govern the following:
    1. Place of Supply
    2. Threshold limits
    3. GST rates on goods and services
    4. Special rates for raising additional resources during a natural calamity or disaster
    5. Special GST rates for certain States