Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 293
Mains level: Paper 2- Federalism and GST
The GST has been hailed as the grand bargain and the success story of the federalism. But the economic disruption caused by the pandemic has put it to test. The article deals with the issue of GST compensation.
Compensating the loss of GST revenue: 2 options
- In the 41st meeting of the GST Council, the Union government had presented the states with two options.
- The Centre had estimated the states’ total loss of GST revenue at Rs 3 lakh crore, of which, Rs 65,000 crore was expected to accrue from the compensation cess.
- Of the remaining Rs 2.35 lakh crore, the loss due to the pandemic was estimated at Rs 1.28 lakh crore.
- The first option was to provide states a special window to borrow Rs 97,000 crore from the RBI, which was later revised to Rs 1.1 lakh crore.
- Under this option, both the interest payments and the repayments would be made from future collections of the compensation cess.
- In the second option, the entire shortfall of Rs 2.35 lakh crore could be borrowed from the market and the states would have to bear the interest costs, but the repayments would be adjusted against future collections of the cess.
- 10 states have rejected both the options and have stated that it is the Centre’s responsibility to compensate the states, and therefore, it should borrow.
Commitment of the Centre
- The minutes of the 7th and 8th GST Council meeting show that most of the states wanted the Centre to commit on paying compensation from the Consolidated Fund of India (CFI).
- On that demand the Union Finance Minister had stated that in case the amount in the GST compensation fund falls short of the compensation payable in any bi-monthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be repaid by the collection of cess in the sixth year or further subsequent years.
- Thus, there was a clear commitment of the Centre on the issue of compensation and the method of recouping the loss.
Impact on the Centre-State relations
- The payment of compensation has plunged the Union-state relationship to a new low.
- First, not recognising the Centre’s commitment will make states wary of any future reforms involving an agreement with the Centre.
- Second, giving selective press statements to pressurise the states into accepting one or the other option does not infuse confidence.
- Third, there was a statement by the Union finance ministry officials that the GST Council does not have jurisdiction over-borrowing and borrowing is an individual state and Centre’s decision under Article 293 of the Constitution.
- If so, why were the two borrowing options presented to the states in the meeting of the Council?
Way forward
- It is the Centre’s commitment to find the compensation mechanism and borrowing is one of the options — that must be discussed in the Council.
- Furthermore, if the commitment of the Centre is recognised as admitted by the finance minister in the 7th GST council meeting, the Centre should take the responsibility to borrow.
- Both interest payments and repayment of the principal liability can be met from future collections from the cess.
Conclusion
This issue is of immense significance for the future of Centre-state relations. But pressuring states on the basis of political strength will have adverse consequences for the country’s federal structure.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: LTRO, Bonds
Mains level: Paper 30- Measures by the RBI to assure the Government bond holders
The article highlights the measures taken by the RBI in the recent MPC meeting to assure the buyers of the Government bonds and ensuring the policy rate transmission.
Dealing with the rate transmission issue and why it matters
- The gap between the repo rate and the average lending rate of banks is at a record high.
- So, the RBI and the MPC focused on improving rate transmission.
- This gap can be broken up into two parts:
- The first is the gap between the RBI-set repo rate and the rate at which the government of India borrows (the GSec yield).
- It is also called the “term premium” can be influenced by the RBI’s actions.
- The second is the gap between the GSec yield and the rate at which individuals or private firms borrow.
- This gap reflects risk aversion in the financial system and a lack of capacity.
- The RBI has avoided directly influencing the term premium, perhaps to maintain its credibility and independence, staying clear of accusations that it is financing the government’s fiscal deficit.
- However, unless the rate at which the government borrows comes down borrowing costs for the whole economy will stay elevated.
Challenge of Balance-of-Payment surplus (i.e. excess dollars)
- Over the past few months, the country’s foreign currency reserves have been growing at an unprecedented rapid pace.
- This means that India is getting far more dollars than it needs. Three factors are responsible for this.
- 1) Some short-term factors responsible are weak imports and a faster normalisation of exports.
- 2) There have also been structural shifts in India’s economic policy which point to a persistent BoP surplus.
- In addition to low energy prices, policies supporting Atmanirbhar Bharat mean lower imports and the push towards making India a participant in global value chains mean higher exports.
- 3) At the same time, India’s capital account is being opened up: The special-category government of India bonds, for example.
Why BoP surplus is opportunity
- When the excess dollar inflows turn into a deluge, as they have over the past six months, the supply of rupees in the domestic economy also becomes excessive.
- If the RBI can direct this surplus into government bonds, it can maintain its independence and credibility, and at the same time achieve its target of rate transmission.
Measures by the RBI to assure the bond market
- The buyers of government bonds need to feel reassured of not getting hurt by the volatility in bond prices.
- When bond prices rise, the yields fall, and vice versa.
- Banks parking trillions of rupees with the RBI at 3.35 per cent overnight would earn nearly 6 per cent if they bought government bonds.
- That they did not was because they were afraid of the bond prices falling, which would offset the gains from higher rates.
- The increase in the Hold-To-Maturity limits by the RBI by one year to March 2022, has assured the banks that they need not fear booking interim losses if bond prices are volatile.
- The announcement that the RBI would purchase state and central government bonds on the market (even if in small sizes) would provide further comfort.
- The change in assessment of inflation should help buyers of government bonds take the risk.
- Banks or other bond investors that refrained from purchasing government bonds because they felt the RBI would increase interest rates at some point to comply with its legal mandate, would be reassured by this clear communication.
- The targeted refinancing operations (TLTRO) should help bring down borrowing rates in the targeted industries.
Conclusion
Economic challenges may persist for the foreseeable future. The economic scars of the last six months are likely to take time to heal. The RBI and the MPC, which have been proactive, creative and accommodative so far, may have to stay so for a while longer.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP. SAP
Mains level: Paper 3- Issues with the MSP regime
The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.
MSP system Vs. Market-driven system
- MSP regime was the creation of the era of scarcity in the mid-1960s.
- Indian agriculture has, since then, turned the corner from scarcity to surplus.
- In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
- This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
- The new laws are trying to increase the relative role of markets without dismantling the MSP system.
- Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
- The market-led system will be more sustainable provided we can “get the markets right”.
Issues with the MSP
- A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
- The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
- No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
- So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
- The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
- The FCI can reduce costs if it uses policy instruments like “put options”.
2 Lessons: from sugarcane and milk pricing
1) Populism resulted in making sugar industry globally non-competitive
- In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
- While some states like Uttar Pradesh announces its own “state advised price” (SAP).
- The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
- This sector has, consequently, become globally non-competitive.
- Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.
2) Success story of milk sector
- In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
- It is more in the nature of a contract price.
- It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
- The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
- Today, India is the largest producer of milk — 187 million tonnes annually.
So, how the recent reforms will help the farmers
- As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
- These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
- These companies will help raise productivity, similar to what has happened in the poultry sector.
- Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.
Conclusion
The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.
Back2Basic: What is MSP
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- The minimum support prices are a guarantee price for their produce from the Government.
- The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
- In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
What are ‘put options’
- Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
- Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
- Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
- Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
- They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: RTI
Mains level: Pendency of RTI cases
Fifteen years after the Right to Information (RTI) Act came into force; more than 2.2 lakh cases are pending at the Central and State Information Commissions, which are the final courts of appeal under the transparency law.
Try this question:
Q.“RTI is a tool for empowering ordinary citizens and changing the culture of governance in India.” Discuss.
Right to Information
- RTI is an act of the parliament which sets out the rules and procedures regarding citizens’ right to information.
- It replaced the former Freedom of Information Act, 2002.
- Under the provisions of RTI Act, any citizen of India may request information from a “public authority” (a body of Government or “instrumentality of State”) which is required to reply expeditiously or within 30.
- In case of the matter involving a petitioner’s life and liberty, the information has to be provided within 48 hours.
- The Act also requires every public authority to computerize their records for wide dissemination and to proactively publish certain categories of information so that the citizens need minimum recourse to request for information formally.
Governing of RTI
The Right to information in India is governed by two major bodies:
- Central Information Commission (CIC) – Chief Information commissioner who heads all the central departments and ministries- with their own public information officers (PIO)s. CICs are directly under the President of India.
- State Information Commissions (SIC)– State Public Information Officers or SPIOs head over all the state department and ministries. The SPIO office is directly under the corresponding State Governor.
- State and CIC are independent bodies and CIC has no jurisdiction over the SIC.
Fundamental status of RTI
- RTI is a fundamental right for every citizen of India.
- Since RTI, is implicit in the Right to Freedom of Speech and Expression under Article 19 of the Indian Constitution, it is an implied fundamental right.
Limitation to RTI
- Information disclosure in India is restricted by the Official Secrets Act 1923 and various other special laws, which the new RTI Act relaxes.
- RTI has proven to be very useful but is also counteracted by the Whistle Blowers Protection Act, 2011.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FELUDA, CAS9, CRISPR
Mains level: CRISPR technology
Union Health Ministry will soon roll out the FELUDA paper strip test for SARS-CoV-2 diagnosis.
Try this PYQ:
Q.What is Cas9 protein that is often mentioned in news?
(a) A molecular scissors used in targeted gene editing
(b) A biosensor used in the accurate detection of pathogens in patients
(c) A gene that makes plants pest-resistant
(d) A herbicidal substance synthesized in genetically modified crops
FELUDA test
- FELUDA is the acronym for FNCAS9 Editor Linked Uniform Detection Assay.
- It uses indigenously developed CRISPR gene-editing technology to identify and target the genetic material of SARS-CoV2, the virus that causes Covid-19.
- According to CSIR, the test matches accuracy levels of RT-PCR tests, considered the gold standard in the diagnosis of Covid-19, has a quicker turnaround time and requires less expensive equipment.
- It is also the world’s first diagnostic test to deploy a specially adapted Cas9 protein to successfully detect the virus.
How does it work?
- The Feluda test is similar to a pregnancy test strip that will just change colour upon detection of the virus and can be used in a simple pathological lab.
- The Cas9 protein is bar-coded to interact with the SARS-CoV2 sequence in the patient’s genetic material.
- The Cas9-SARS-CoV2 complex is then put on the paper strip, where using two lines (one control, one test) makes it possible to determine if the test sample was infected.
Back2Basics: CRISPR technology
- CRISPR is a short form for Clustered Regularly Interspaced Short Palindromic Repeats.
- It is a gene-editing technology and finds its use in correcting genetic defects and treating and preventing the spread of diseases.
- The technology can detect specific sequences of DNA within a gene and uses an enzyme functioning as molecular scissors to snip it.
- It also allows researchers to easily alter DNA sequences and modify gene function.
- Moreover, the technology can also be configured for detection of multiple other pathogens in the future.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Blue Flag Beaches
Mains level: Not Much
Eight Indian beaches have got an International Blue Flag Certification, said Union Minister of Environment, Forest and Climate Change.
Note the beaches and their respective states. They can be asked in the ”match the pairs” type questions.
Citation needed: *As of now, there are 13 Blue flag awarded beaches in India a/c to wikipedia. But Blue Flag website would provide exact figures (which yet to update the official numbers).
Which are these beaches?
- Shivrajpur (Dwarka-Gujarat)
- Ghoghla (Diu)
- Kasarkod [NOT Kasargod which is in Kerala] and Padubidri (Karnataka)
- Kappad (Kerala)
- Rushikonda (AP)
- Golden Beach (Odisha) and
- Radhanagar (A&N Islands)
Blue Flag Beaches
- The ‘Blue Flag’ beach is an ‘eco-tourism model’ and marks out beaches as providing tourists and beachgoers clean and hygienic bathing water, facilities/amenities, a safe and healthy environment, and sustainable development of the area.
- The certification is accorded by the Denmark-based Foundation for Environment Education.
- It started in France in 1985 and has been implemented in Europe since 1987, and in areas outside Europe since 2001 when South Africa joined.
- It has 33 stringent criteria under four major heads for the beaches, that is, (i) Environmental Education and Information (ii) Bathing Water Quality (iii) Environment Management and Conservation and (iv) Safety and Services.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Skal International Asia Area (SIAA)
Mains level: NA
The UT of Jammu and Kashmir has won the bid to host the 50th annual Skal International Asia Area (SIAA) Congress in 2021 during the annual general meeting recently against four other cities.
Note: Skal International is not an affiliate of the United Nations. This is where a prelims question can pull a nerve.
Skal International
- Skal International is a professional organization of tourism leaders around the world, promoting global tourism and friendship.
- It is a Spain-based tourism body with 15,000 members and 150 chapters across the world.
- The word Skal comes from Scandinavia and has a long tradition. The “Skal” is a bowl containing a welcome drink that is offered to visitors when entering a home.
- Its members, the industry’s managers and executives meet at local, national, regional and international levels to discuss and pursue topics of common interest.
- It is the only international group uniting all branches of the travel and tourism industry.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Raychaudhuri Equation
Mains level: Not Much
The Raychaudhuri Equation in General Relativity, derived by Raychaudhuri is in the spotlight after 2020 Physics Nobel was awarded to Penrose for throwing light on Black Holes.
Try this MCQ:
Q.The Raychaudhuri Equation is sometimes seen in news is related to:
Artificial Intelligence/Cloud Computing/Quantum Mechanics/Space Sciences
What is Raychaudhuri Equation?
- Raychaudhuri (1923–2005) was an Indian physicist, known for his research in general relativity and cosmology.
- In general relativity, the Raychaudhuri equation is a fundamental result describing the motion of nearby bits of matter.
- It was discovered independently by the Indian physicist Amal Kumar Raychaudhuri and the Soviet physicist Lev Landau.
- The equation offers a simple and general validation of our intuitive expectation that gravitation should be a universal attractive force between any two bits of mass-energy in general relativity, as it is in Newton’s theory of gravitation.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Aenigmachanna Gollum
Mains level: NA
Scientists have discovered a new family of bony fish from the Western Ghats and named it Aenigmachannidae.
A stand-alone species being mentioned in the news for the first time (and that too from Southern India) find their way into the prelims. Make special note here. Usually, note the species and its habitat location (IUCN status if available), in the purview of a generic prelims question.
Aenigmachannidae
- Aenigmachanna Gollum has a surprisingly large number of primitive characters, and detailed molecular phylogenetic analyses including of its Mitochondrial DNA suggested an ancient separation from Channidae.
- Many such species were earlier found in the aquifers of Kerala.
- Many of these species are blind, pigment-less, and have peculiar morphological characters that are otherwise not seen in species occurring in surface waters.
Significance of the discovery
- The presence of two unique endemic families of freshwater fish in a small region like Kerala is unparalleled and indicates the exceptional diversity and endemicity of fishes in this part of the world.
- The members of Aenigmachannidae are “living fossils” and comprise an ancient Gondwanan lineage that survived the break-up of the supercontinent and the northward drift of the Indian subcontinent.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bharatmala Project
Mains level: Highways connectivity in India
A total of 322 projects in a length of 12,413 km have been awarded under Bharatmala Pariyojana. Further, 2921 Km has been constructed under the Project till the date.
Try this PYQ:
Q.Consider the following pairs:
National Highway: Cities connected
- NH 4: Chennai and Hyderabad
- NH 6: Mumbai and Kolkata
- NH 15: Ahmedabad and Jodhpur
Which of the above pairs is/are correctly matched?
(a) 1 and 2 only
(b) 3 only
(c) 1, 2 and 3
(d) None
Bharatmala Pariyojana
- It is a centrally-sponsored and funded the Road and Highways project.
- It is an umbrella program for the highways sector that focuses on optimizing the efficiency of freight and passenger movement across the country by bridging critical infrastructure.
- The total investment for 83,677 km committed new highways is estimated at ₹5.35 lakh crore making it the single largest outlay for a government road construction scheme.
- It works for the development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads and Green-field expressways.
- The ambitious umbrella programme has subsumed all existing Highway Projects including the flagship National Highways Development Project (NHDP), launched in 1998.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now