07 November, 2020

  • Takeaways from the discussion
  • India - US relations under Joe Biden (International relations)
  • GST on Mobility aid items (Social Issues)
  • Food Fortification (Social issues)
  • Criteria 15th Finance commission (Economy)
  • Question for the day

Prelims Quiz

    Solution.

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    UPSC Current Affairs: Biden, India and comfort in the old normal | Page 06

    UPSC Syllabus: | Mains: GS Paper II – International Relation

    Sub Theme: Indo-U.S relation |UPSC     

    India and Biden

    Context: As Joe Biden is inching towards victory in USA, attention in India is on the question - What kind of foreign policy changes he will bring to India-U.S. relations.

    Similarity in Biden And trump's approach -

    Biden under Obama administration had advised upon Withdrawal of troops from Afghanistan.

    He had advised a five-point agenda  called “Counter-terrorism Plus” -

    • A full focus on al-Qaeda.
    • Exiting other counterinsurgency missions.
    • Dropping the Bush era “nation-building” theme.
    • Reducing U.S. bases to just two or three.
    • Fighting the Taliban with a view to bringing them to the table for reconciliation.

    These recommendations were not accepted by the Obama administration. However such Trump had picked up some of the recommendations provided by Joe Biden. This was visible in 

    • Large-scale pull-out of U.S. troops.
    • Limited U.S. presence at bases and its mission in Afghanistan.
    • Starting  a reconciliation process with the Taliban.
    • Afghan peace deal with Taliban

    According to author this shows that in the international sphere there will not be much difference in the approach of Mr Biden and trump.

    Continuity under New President -

    • The Indo-Pacific focused embraced by the trump admin was started under the Obama administration.
    • Further Mr. Biden will build on the military foundational agreements with India, strengthen military cooperation and push the sale of U.S. military hardware.

    Economy -

    • No major changes are expected on this front.
    • But the new administration can restore the Generalized System of Preferences (GSP) status for  Indian exporters.
    • He has already assured Indians on the VISA issue in the election speeches.

    Areas of Friction  -

    • Democratic Party has been vocal against some the issues on which Trump administration had maintained silence.
    • These include - Jammu-Kashmir, the Citizenship (Amendment) Act, communal and caste-based violence, actions against non-governmental organisations and media freedoms.

    Some areas to watch -

    • Major challenges that need to be addressed by the New president include -
    • Reverse the downward spiral of America.
    • Repair relations with many countries, especially in the trans-Atlantic region.
    • Restoring America’s leadership in the UN bodies would be another priority.
    • In the last four years, Trump had walked out of at least a dozen multilateral bodies or threatened to do so.
    • Some of them include - World Health Organisation, UNESCO, Human Rights Council, agreements such as the Joint Comprehensive Plan of Action, the Iran nuclear deal and the Paris Climate Accord and traditional trans-Atlantic and trans-Pacific alliances - NATO and the TPP.

    In his eagerness to make America great locally, Trump ended up making America weak globally

     

    UPSC Current Affairs: Market dictates and a blow against equality | Page 06

    UPSC Syllabus: Mains – GS Paper III - Indian Economy

    Sub Theme:  GST and the mobility aids | UPSC   

    Context

    Presently, the GST Council imposes a GST rate of 5% on various mobility aids used by differently abled such as Wheelchairs, tricycles, braille paper, Braille watches etc. The imposition of GST on these essential items has led to increase in their prices and hence made them unaffordable for the poorer section among the differently abled.

    In this regard, recently a PIL was filed before the Supreme Court on the constitutional validity of imposition of GST on these mobility aids. In this PIL, the petitioner argued that imposition of GST on these items was discriminatory and violated fundamental rights of the differently abled such as Right to Life (Art. 21).

    However, the SC ruled that the decision of imposing tax and determining its rate is the prerogative of the Executive. The Judiciary cannot ordinarily interfere in such matters. Accordingly, it asked the petitioner to file his grievances before the GST Council.

    In this regard, this article argues for GST exemption on the Mobility aids used by the differently abled.

    Government's argument for Imposition of GST on Mobility Aids

    Need for Imposition of GST on Mobility Aids: The Government believes that imposition of GST on mobility aids is a win-win situation for the domestic manufacturers and differently abled.

    The GST provides for the Input tax credit mechanism which enables the domestic manufacturers to claim input tax credit on the payment of taxes on various inputs. Such form of input tax credit incentives them to undertake higher production leading to decrease in the prices of mobility aids and thus benefits the differently abled.

    Implications of GST Exemption on Mobility Aids: If mobility aids are exempted from GST, the domestic manufacturers would not be able to claim input tax credits on the payment of taxes on various inputs. This would disincentivise domestic manufacturing of mobility aids. Hence, exemption of GST on mobility aids would them unavailable and unaffordable for the differently abled.

    Author's Counter Arguments

    Exemption on other products: The GST Council has fixed 0% GST on number of goods which are essential to human needs such as unbranded agricultural items (Cereal grains, fish, fresh milk, Natural honey etc). Hence, considering the fact that Mobility aids are essential for the differently abled, these products should be exempted from the GST.

    Availability of alternatives to incentivise domestic manufacturing: The Government has other options available to incentivise domestic manufacturing of mobility aids without affecting the interests of differently abled. For example, the Government could exempt the manufacturers from the payment of taxes on their inputs.

    Way forward

    Considering the importance of Mobility aids, the GST council must learn from countries such as Canada and Australia and grant a complete exemption on the GST. Afterall, the purpose of taxation is not to generate revenue but to ensure welfare of all.

     

    UPSC Current Affairs: ‘It is a long journey to distribute fortified rice at govt. schools’ |Page 10

    UPSC Syllabus: Mains – GS Paper II – Social Justice

    Sub Theme: Health & Nutrition | Food Fortification | Anaemia |UPSC        

    The government announced earlier this week its plans to expand supply of rice fortified with iron, vitamin B-12 and folic acid on a pilot basis from 15 districts to 15 States with the aim to curb anaemia.

    • Food fortification or enrichment is the process of adding micronutrients to food.
    • Anaemia is a condition in which the blood doesn't have enough healthy red blood cells. This leads to reduced oxygen flow to the body's organs.
      • As many as 58.5% of children between the ages of 6 months and 59 months, and 53.1% of women between the ages of 15 and 49 years, are anaemic in the country. (NFHS -IV)
      • Treatment of anaemia depends on underlying cause. Iron supplements can be used for iron deficiency. Vitamin B supplements may be used for low vitamin levels.
    • Folic acidis a type of vitamin-B that helps our body produce and maintain new cells, and also helps prevent changes to DNA that may lead to cancer.

    Fortified rice can provide 30-50% of the recommended dietary allowance of iron that adults need to consume daily, based on average Indian consumption.

    Problems that lies ahead

    1. Some are also wary that fortification of staples such as cereals may hurt local economies.
    2. Trials in a controlled setting, giving 100% Recommended Dietary Allowance of iron through tablets, have shown results within 10 months. However, in a programmatic setting, with fortified rice, a minimum of 24 months of constant exposure is needed before the impact was seen.
      1. So, to implement distribution of fortified rice at government schools and anganwadi centres, millers and snack manufacturers need to be brought on board.
      2. Food manufacturers will have to use the extrusion machines now used to make snacks such as kurkure or dried pasta shapes to also make fortified rice kernels, enriched with iron and other nutrients.
    3. Then the country’s 28,000 rice millers will have to be brought on board, to install blending machines which can mix the fortified kernels into the normal rice in a 1:100 ratio.
    4. Some public health experts also warn of adverse consequences of “the corporatisation of the food system”.

     

    UPSC Current Affairs: Finance panel warns of rising GST dues for States | Page 01

    UPSC Syllabus: Mains: GS Paper 3 – Indian Economy

    Sub Theme: GST Compensation to the states | UPSC       

    Recommendations on fiscal roadmap

    • Fiscal deficit and debt levels: The Commission noted that recommending a credible fiscal and debt trajectory roadmap remains problematic due to uncertainty around the economy.  It recommended that both central and state governments should focus on debt consolidation and comply with the fiscal deficit and debt levels as per their respective Fiscal Responsibility and Budget Management (FRBM) Acts.
    • Off-budget borrowings: The Commission observed that financing capital expenditure through off-budget borrowings detracts from compliance with the FRBM Act.   It recommended that both the central and state governments should make full disclosure of extra-budgetary borrowings.   The outstanding extra-budgetary liabilities should be clearly identified and eliminated in a time-bound manner.
    • Statutory framework for public financial management: The Commission recommended forming an expert group to draft legislation to provide for a statutory framework for sound public financial management system.  It observed that an overarching legal fiscal framework is required which will provide for budgeting, accounting, and audit standards to be followed at all levels of government.
    • Tax capacity: In 2018-19, the tax revenue of state governments and central government together stood at around 17.5% of GDP.  The Commission noted that tax revenue is far below the estimated tax capacity of the country.  Further, India’s tax capacity has largely remained unchanged since the early 1990s.   In contrast, tax revenue has been rising in other emerging markets.  The Commission recommended: (i) broadening the tax base, (ii) streamlining tax rates, (iii) and increasing capacity and expertise of tax administration in all tiers of the government.
    • GST implementation: The Commission highlighted some challenges with the implementation of the Goods and Services Tax (GST).  These include: (i) large shortfall in collections as compared to original forecast, (ii) high volatility in collections, (iii) accumulation of large integrated GST credit, (iv) glitches in invoice and input tax matching, and (v) delay in refunds.  The Commission observed that the continuing dependence of states on compensation from the central government (21 states out of 29 states in 2018-19) for making up for the shortfall in revenue is a concern.  It suggested that the structural implications of GST for low consumption states need to be considered.

    Other recommendations

    • Financing of security-related expenditure: The ToR of the Commission required it to examine whether a separate funding mechanism for defence and internal security should be set up and if so, how it can be operationalised.  In this regard, the Commission intends to constitute an expert group comprising representatives of the Ministries of Defence, Home Affairs, and Finance.  The Commission noted that the Ministry of Defence proposed following measures for this purpose: (i) setting up of a non-lapsable fund, (ii) levy of a cess, (iii) monetisation of surplus land and other assets, (iv) tax-free defence bonds, and (v) utilising proceeds of disinvestment of defence public sector undertakings.  The expert group is expected to examine these proposals or alternative funding mechanisms.

    Grants-in-aid

    In 2020-21, the following grants will be provided to states: (i) revenue deficit grants, (ii) grants to local bodies, and (iii) disaster management grants.  The Commission has also proposed a framework for sector-specific and performance-based grants.  State-specific grants will be provided in the final report.

    • Revenue deficit grants: In 2020-21, 14 states are estimated to have an aggregate revenue deficit of Rs 74,340 crore post-devolution.  The Commission recommended revenue deficit grants for these states (see Table 4 in the annexure).
    • Special grants: In case of three states, the sum of devolution and revenue deficit grants is estimated to decline in 2020-21 as compared to 2019-20.  These states are Karnataka, Mizoram, and Telangana.  The Commission has recommended special grants to these states aggregating to Rs 6,764 crore.
    • Sector-specific grants: The Commission has recommended a grant of Rs 7,375 crore for nutrition in 2020-21.  Sector-specific grants for the following sectors will be provided in the final report: (i) nutrition, (ii) health, (iii) pre-primary education, (iv) judiciary, (v) rural connectivity, (vi) railways, (vii) police training, and (viii) housing.
    • Performance-based grants: Guidelines for performance-based grants include: (i) implementation of agricultural reforms, (ii) development of aspirational districts and blocks, (iii) power sector reforms, (iv) enhancing trade including exports, (v) incentives for education, and (vi) promotion of domestic and international tourism.  The grant amount will be provided in the final report.  
    • Grants to local bodies: The total grants to local bodies for 2020-21 has been fixed at Rs 90,000 crore, of which Rs 60,750 crore is recommended for rural local bodies (67.5%) and Rs 29,250 crore for urban local bodies (32.5%).  This allocation is 4.31% of the divisible pool.   This is an increase over the grants for local bodies in 2019-20, which amounted to 3.54% of the divisible pool (Rs 87,352 crore).  The grants will be divided between states based on population and area in the ratio 90:10. The grants will be made available to all three tiers of Panchayat- village, block, and district.
    • Disaster risk management:  The Commission recommended setting up National and State Disaster Management Funds (NDMF and SDMF) for the promotion of local-level mitigation activities.  The Commission has recommended retaining the existing cost-sharing patterns between the centre and states to fund the SDMF (new) and the SDRF (existing).  The cost-sharing pattern between centre and states is (i) 75:25 for all states, and (ii) 90:10 for north-eastern and Himalayan states.
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