9 PM Daily Current Affairs Brief – February 3rd, 2023

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GS PAPER - 1

Fire and ice – Problem facing Ladakh

Source– The post is based on the article “Fire and ice” published in The Hindu on 3rd February 2023.

Syllabus: GS2- Polity. GS1- Regionalism

Relevance– Regional political issues

News– The people of Ladakh are on agitation for their demands.

What are the demands of agitating people in Ladakh?

They are demanding the inclusion of the region in the Sixth Schedule under Article 244 of the Constitution.

Other demands are restoration of full-fledged Statehood, separate Lok Sabha seats for Leh and Kargil districts and job reservation for locals.

They describe the demands as key to protecting Ladakh’s identity, culture and the fragile environment.

What are the main issues facing Ladakhi people?

Soon after its creation as a UT in August 2019, Ladakh came under a bureaucracy. It has been hostile and unresponsive to the local population.

The constant tussle between locals, elected representatives of two Hill Councils of Kargil and Leh has only widened over the months.

Leh’s political and religious bodies formed the Leh Apex Body in 2020.

In Kargil district, some political parties and Shia Muslim-affiliated seminaries joined hands in November 2020 to form the Kargil Democratic Alliance. It is advocating for re-joining with the erstwhile J&K State and restoration of its special status under Article 370.

What is the response of the centre?

The Centre appears to be in a bind. The two committees appointed by it to reassure the local populations have made little progress in the last two years.

Second committee appointed this year under the Minister of State has only deepened local anger. It has no mandate to address the issues being raised.

GS PAPER - 2

Trading more within Asia makes economic sense

Source– The post is based on the article “Trading more within Asia makes economic sense” published in The Hindu on 3rd February 2023.

Syllabus: GS2- Bilateral, Regional and Global Groupings and Agreements

Relevance– Trade and Economic relations across Asia

News– IMF has warned that global trade would slow down from 5.4% in 2022 to 2.4% in 2023. It calls for having a re-look at regional trade across Asia.

What are some facts and statistics about trade South Asia- East Asia Trade?

A recently published paper in an IMF says that a strong base exists for South Asia trading more with dynamic East Asia.

Since the 1990s, South Asia-East Asia trade has gathered pace. It is linked to India’s trade re-aligning towards East Asia through its ‘Look East’ and ‘Act East’ policies, South Asia adopting reforms, and also China offshoring global supply chains to Asia.

The total merchandise trade between South Asia and East Asia grew at about 10% annually between 1990 and 2018 to $332 billion in 2018.

The free trade agreements linking economies in South Asia with East Asia may rise to 30 by 2030.

Regional trade in Asia is recovering after the COVID-19 pandemic. It has opened opportunities for South Asia to participate in global value chains and services trade.

What needs to be done for regional trade integration across Asia?

Reforms in taxation structure– Regional trade integration across Asia can be encouraged by gradually reducing barriers to goods and services trade. Import tariffs and non-tariff measures have risen in several South Asian economies since the 2008 global financial crisis.

Trade opening in South Asia should be calibrated with tax reforms as trade taxes account for much of government revenue in some economies.

Finance for loss making sectors and re-training of workers is also essential to promote gains from trade.

SEZs reforms– There is a need to improve the performance of special economic zones and invest in services SEZs to facilitate exports.

South Asia has over 600 SEZs in operation.These SEZs have a variable record in terms of exports and jobs and fostering domestic linkages.

SEZ reforms in South Asia require macroeconomic and political stability, good regulatory policies towards investors, reliable electricity and 5G broadband cellular technology, and also worker skills.

Comprehensive FTAs– These will eventually lead to the Regional Comprehensive Economic Partnership to provide for a regional rules-based trade.

South Asia is a latecomer to FTAs when compared to East Asia. But, it has made a start with the Japan-India FTA, the Sri Lanka-Singapore FTA and the Pakistan-Indonesia FTA.

South Asian economies need to improve tariff preference use. They need to be better prepared in navigating the complex rules of origin in FTAs and including issues relevant to global supply chains in future FTAs.

Reinvented trade-focused BIMSTEC– It can facilitate stronger trade ties and support the interests of smaller members.

It requires better resourcing its Secretariat, BIMSTEC FTA, trade capacity in smaller economies, and introducing dialogue partner status.

What is the way forward for better integration?

A narrower geographical coverage between South Asia and Southeast Asia may be a building block for trade integration across Asia. The larger economies should facilitate gains from trade to the smaller economies.

There is a need for political will to implement pro-trade policies that can improve the lives of Asians.

India is South Asia’s largest economy and its G-20 presidency can be a good platform to initiate these changes.

System Bails Out – Kappan finally free on bail but many aren’t, in contravention of juridical principles

Source: The post is based on an article “System Bails Out – Kappan finally free on bail but many aren’t, in contravention of juridical principles” published in The Times of India on 3rd February 2023.

Syllabus: GS 2 – Governance

News: The Kerala journalist Siddique Kappan has been freed from jail after 846 days. He was charged with Unlawful Activities (Prevention) Act (UAPA) and the Prevention of Money Laundering Act (PMLA).

This issue highlights the concerns of prisoners who are kept in jails for a long period.

What are the concerns with the Indian laws and prisoners?

SC in recent cases has recalled Justice Krishna Iyer’s 1977 guidance in which he called for “Bail not jail”.

However, many laws like the UAPA discourage bail and even the judiciary goes along with the pre-trial arrest and long hearing, instead of taking the responsibility of preserving the liberty of all citizens.

Furthermore, conviction rates are low in IPC crimes, e.g., 42.4% for murder, 28.6% for rape, and 21.9% for riots. It is the undertrial prisoners which constitute 80% of the country’s prisoners, crowding the jails.

Most victims do not have the legal, financial and emotional resources to fight for themselves and lead out of jail.

However, if courts take action properly, then even these resources wouldn’t be needed by the undertrials.

Fire and ice – Problem facing Ladakh

Source– The post is based on the article “Fire and ice” published in The Hindu on 3rd February 2023.

Syllabus: GS2- Polity. GS1- Regionalism

Relevance– Regional political issues

News– The people of Ladakh are on agitation for their demands.

What are the demands of agitating people in Ladakh?

They are demanding the inclusion of the region in the Sixth Schedule under Article 244 of the Constitution.

Other demands are restoration of full-fledged Statehood, separate Lok Sabha seats for Leh and Kargil districts and job reservation for locals.

They describe the demands as key to protecting Ladakh’s identity, culture and the fragile environment.

What are the main issues facing Ladakhi people?

Soon after its creation as a UT in August 2019, Ladakh came under a bureaucracy. It has been hostile and unresponsive to the local population.

The constant tussle between locals, elected representatives of two Hill Councils of Kargil and Leh has only widened over the months.

Leh’s political and religious bodies formed the Leh Apex Body in 2020.

In Kargil district, some political parties and Shia Muslim-affiliated seminaries joined hands in November 2020 to form the Kargil Democratic Alliance. It is advocating for re-joining with the erstwhile J&K State and restoration of its special status under Article 370.

What is the response of the centre?

The Centre appears to be in a bind. The two committees appointed by it to reassure the local populations have made little progress in the last two years.

Second committee appointed this year under the Minister of State has only deepened local anger. It has no mandate to address the issues being raised.

GS PAPER - 3

India’s G20 Presidency: LiFE lessons for global markets

Source– The post is based on the article “India’s G20 Presidency: LiFE lessons for global markets” published in The Indian Express on 3rd February 2023.

Syllabus: GS3- Environment

Relevance– Sustainable development

News– The world is facing its first truly global energy crisis, with turbulent markets and sharp price spikes. It is creating difficulties for citizens, businesses and governments.

What is LiFE initiative?

It demonstrates India’s leadership on global issues by promoting sustainable lifestyles and consumption choices worldwide.

LiFE initiative was launched in October 2022 to nudge individual and collective action to protect the environment.

This includes making informed personal choices such as using public transport more, buying electric vehicles, adopting energy-efficient appliances in homes.

What is the importance of LiFE initiative?

LiFE initiative could help lower energy costs, carbon dioxide emissions, air pollution and inequalities in energy consumption. The programme could potentially help put developing and advanced economies alike onto a more sustainable path.

Reducing emissions– IEA analysis shows that if all countries adopt the measures recommended by LiFE, it would reduce global carbon dioxide emissions by more than 2 billion tonnes by 2030.

This will be one-fifth of the emissions reductions needed this decade to put the world on a path to net zero emissions. The measures would also save consumers globally around $440 billion in annual energy bills.

Doesn’t negate the strong policies action– Strong policy actions for expanding clean energy technologies. We need to do many things at once to tackle the world’s environmental challenges while ensuring secure and affordable energy supplies for all.

That is why LiFE’s recommendations become important.

Industries like steel and cement can learn from LiFE by adopting approaches that use resources more efficiently. Increasing the volume of recycled steel can reduce the amount of steel production that needs to be decarbonised.

Combines individual accountability and policy actions– We all need to make the right choices when it comes to the environment and sustainability. These choices should be supported by appropriate infrastructure, incentives or information.

For example, public transport must become more efficient and readily accessible to encourage citizens for its use. Urban planning needs to be optimised so individuals can live closer to work and amenities that reduce commute times and encourage walking and cycling.

Sustainable development– It’s important that the environment should not be prioritised at the expense of India’s broader development agenda. This requires a range of measures. LiFE’s recommendations can help support this.

Global relevance– LiFE shouldn’t be seen as only relevant to India and developing economies. Its lessons are applicable globally. It could make the biggest difference in advanced economies.

The global energy crisis has led to renewed interest in behaviour change and energy efficiency, particularly in advanced economies.

How India’s G20 Presidency represents a unique opportunity to globalise the LiFE initiative?

It provides a knowledge-sharing platform for other leading economies to realise the impact of LiFE’s recommendations on climate change, air pollution and unaffordable energy bills.

G20 makes up nearly 80 per cent of global energy demand. Meaningful changes by its members can make a big difference.

Decluttering the defence budget

Source: The post is based on an article “Decluttering the defence budget” published in Business Standard on 3rd February 2023.

Syllabus: GS 3 – Government Budgeting

Relevance: Budget 2023-24 for the defence

News: The article discusses the shortcomings of the Budget 2023-24 in the defence sector.

What are the shortcomings with the budget in the defence sector?

Decline in budgetary outlay: The defence budget, including pensions to veterans, has for the first time fallen to below two percent of the GDP.

The defence budget showed a rise of 13 percent over the previous year’s budget. However, this rise in the defence budget is only 1.5 percent when compared to the revised estimates for the last year.

Moreover, capital outlay for modernisation and infrastructure development increased to 57 per cent since 2019-20. However, compared to last year’s capital budget allocations, this year’s capex allocation represents a raise of barely 6 percent.

This is inadequate because of prevailing macro-fiscal environment of high inflation and a falling rupee.

Moreover, the defence capital allocations form a part of the capital investment outlay in the Union Budget.

While the capital investment outlay has risen for the third year in a row by 33 percent, the rise in defence capital allocations is not upto the mark.

Inadequate distribution of the budget amongst the three services: The distribution of the capex fund amongst the three services (Airforce, Army, Navy) is not uniform. The allocations would have been made on the basis of roles assigned to each service by National Security Strategy (NSS).

NSS objectives would have made budget allocations more effective because that would determine the kind of warships, equipment, tanks, missiles, etc. needed for the three services.

However, the current budget has allocated non-uniform fund to the three services without keeping in mind these objectives.

Inadequate allocation of the budget to other organization of the defence: The budget allocations for the coast guard, the Jammu & Kashmir Light Infantry and for the Border Roads Organisation is not as expected. These organizations form a part of the defence ministry budget.

Therefore, the budget allocations would have been made according to their role and functions. However, this has not been done.

Hence, it would be better to allow those organizations to have their own demand for grant or to consolidate their allocations along with the consolidation of Defence R&D Organisation budget.

A ‘waterfall’ for insolvency resolution

Source– The post is based on the article “A ‘waterfall’ for insolvency resolution” published in the Business Standard on 3rd February 2023.

Syllabus: GS3- Changes in Industrial Policy and their Effects on Industrial Growth

Relevance– Exit process of the business

News– The Ministry of Corporate Affairs has recently issued a discussion paper inviting comments on the changes it is proposing to further strengthen the IBC.

What is suggested by the discussion paper on strengthening the IBC?

It suggests proceeds up to the liquidation value will be distributed in the order of priority provided in the liquidation waterfall to secured and unsecured creditors.

Any surplus over the liquidation value will be ratably distributed among creditors in the ratio of their unsatisfied claims.

Creditors strike different commercial bargains with the company. All secured creditors have different levels of security interest. Some are undersecured, some are fully secured and some are oversecured.

What are the important provisions in the IBC related to realisation of debt by creditors in the insolvency process?

The insolvency law honours pre-existing contractual relationships between debtors and creditors. Secured creditors have priority claims on their respective security.

In recognition of the amount of security, an undersecured creditor and a fully secured creditor have different entitlements in an insolvency proceeding.

During the rehabilitation stage, the moratorium keeps the security intact. It will be available to the secured creditor during liquidation.

During the liquidation stage, the secured creditor can either take away the security and sell it on its own, or leave it with the liquidator to sell the security and receive the sale proceeds. Insolvency proceedings generally protect the secured claim to the extent of the value of security.

Where the secured creditor’s claim exceeds the value of the security, the excess is treated as an unsecured claim.

Section 52 of the IBC allows a secured creditor to realise the security interest on its own. If realisation exceeds the debts due to the secured creditor, the excess has to be tendered to the liquidator.

When realisation falls short of the debt owed to the secured creditor, the unpaid debt is to be paid by the liquidator in accordance with the waterfall under section 53.

In the waterfall, debts owed to a secured creditor for any amount unpaid following the realisation of security interest ranks lower than the financial debts owed to unsecured creditors.

What are the issues with the liquidation process?

Data shows that the rehabilitation process, on average, realises Rs 177 if the company has assets valued at Rs 100.

Assuming that the creditors have a security interest over all the assets, they would get only Rs 100 if the company is liquidated or they enforce their contracts otherwise.

The surplus of Rs 77 that the rehabilitation process generates is meant to satisfy the unsecured claims of creditors.

The distribution of this excess has been contentious.

In 2019, the legislature and judiciary settled the law that creditors, whether secured or unsecured, should be paid not less than what they would receive in the event of liquidation.

This allows discretion to the Committee of Creditors to distribute the excess. The Committee has not been generous while exercising discretion.

There is a feeling that the excess is being mostly appropriated by members of the Committee.

What is the way forward?

The insolvency law generally reflects public interest choices. The policy of distribution of excess to satisfy unsecured claims should also reflect public interest choice.

Business needs both financial and operational credit, in the interest of availability of credit. Therefore, excess needs to satisfy unsecured claims of financial creditors and operational creditors equitably.

There is even a case for prioritising unsecured claims of operational creditors as they do not sit on the decision-making table.

There is a need to resolve the dispute by distributing liquidation value vertically among financial and operational creditors.

Excess resolution proceeds over the liquidation value can be shared horizontally among all creditors in proportion to their remaining claims.

The National Company Law Appellate Tribunal has urged to consider entitlement for operational creditors, based on the amount realised in the resolution plan over and above the liquidation value.

The discussion paper has essentially proposed a formula on these lines and equates all unsecured claims at par. Implementing this proposal can keep the insolvency proceedings integrated, rather than making it complex.

 

The Union budget ticks all the right boxes for India Inc

Source: The post is based on the following articles

“The Union budget ticks all the right boxes for India Inc” published in the Livemint on 3rd February 2023.

“Express View on Budget 2023: Adding it up” published in the Indian Express on 3rd February 2023.

Syllabus: GS 3 – Government Budgeting.

Relevance: Budget 2023-24 is for various sectors.

News: The government has recently presented the Union Budget 2023-24 in Parliament.

What are the major highlights of the Union Budget 2023-24?
Must read: Union Budget 2023-24 Highlights

What are the domestic economic concerns and how does the budget address those?

Read here: Budget 2023 pulls off an artful balance

Why budget 2023-24 is for various sectors?

The budget 2023-24 is a growth-oriented one. For instance, It increases consumption demand by reducing taxes.

Infrastructure is a long-term growth engine. This year’s budget increases infrastructure development by a) Increasing CapEx, b) Continuing the 50-year interest-free loan facility for states, c) Introducing dispute resolution under ‘Vivad se Vishwas’ to settle contractual disputes of government and public sector undertakings, d) Creating an urban infrastructure development fund.

All this will have a multiplier effect on demand and provide an impetus to the private-sector capital expenditure cycle.

For the MSME segment: a) Announced a revamped credit guarantee scheme, b) corporates are incentivized to make timely payments to MSMEs, c) For MSMEs that came up short in executing government contracts during the pandemic, the government has announced a one-time refund of 95% of their forfeited security amounts.

For greener ecosystem: Major thrust planned for green energy

What are some concerns highlighted in budget 2023-24?

-The budget continued scaling down the government’s disinvestment target. For instance, in 2021-22, the budget had pegged proceeds from disinvestment at Rs 1.75 lakh crore. Actual proceeds stood at a mere Rs 13,627 crore. For the coming year, the budget has lowered disinvestment to Rs 51,000 crore.

Not provided a detailed roadmap: The government has chosen not to provide a medium term fiscal roadmap. According to the government, “medium term projections amidst unprecedented global turbulence and headwinds may not be reliable”. But a detailed roadmap would have helped the government to align short-term measures with the goal of achieving medium-term targets.

To sum up, the budget 2023-24 is pro-growth, pro-infrastructure, pro-energy transition and pro-MSMEs as well.

New income tax regime: A nudge on income tax mustn’t become a shove

Source: The post is based on the article “A nudge on income tax mustn’t become a shove” published in the Livemint on 3rd February 2023.

Syllabus: GS 3 – Government Budgeting.

Relevance: About the new income tax regime.

News: In the Budget 2023-24, the government introduced a new income tax regime.

About the new tax regime on Personal Income Tax

Read here: New tax regime gives spending flexibility

What are the advantages of the new income tax regime?

a) The new tax regime offers no tax-free gaps to park money, b) It suits persons who cannot gather the documents needed to claim deductions, c) Provide greater liberty on what one can do with their salaries, d) Rise in discretionary income could do economy a favour.

What are the concerns associated with the new income tax regime?

-Loss of revenue: The new tweaks are expected to cost the exchequer around ₹37,000 crore in lost revenue next fiscal year.

-The new income tax regime does not phase out India’s old tax regime.

-Few state-run institutions depend on their tax sops for a chunk of their business would protest against the new regime.

Overall, the new regime will offer a case study in behavioural economics of Indians.

Union Budget 2023-24: Key Highlights – Explained, pointwise

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Introduction

The Union Finance Minister has presented the Union Budget 2023-24 in the Parliament. This is the last full budget before the next year’s General Elections. There were apprehensions that the Budget may resort to populist measures ahead of the election year. However, most economic experts have observed that the Government has tried to push for long term growth while ensuring macro-stability in the short term. The Government has focused on increasing the capital expenditure and raising more revenues through disinvestment and privatization. The Government has maintained fiscal prudence and has avoided splurging on populist schemes.

What is the vision of the Union Budget 2023-24?

The Union Finance Minister said that the vision for the Amrit Kaal includes technology-driven and knowledge-based economy with strong public finances, and a robust financial sector. To achieve this, Jan Bhagidari through Sabka Saath Sabka Prayas is essential. The Economic Agenda to achieve this focuses on 3 things: (a) Facilitating ample opportunities for citizens, especially the youth, to fulfill their aspirations; (b) Providing strong impetus to growth and job creation; (c) Strengthening macro-economic stability.

Vision for Amrit Kaal

Source: PIB

To service these focus areas in the journey to India@100, Four opportunities can be transformative during Amrit Kaal, (a) Economic Empowerment of Women: Through formation of large producer enterprises or collectives; (b) PM ViIshwakarma KAushal Samman (PM VIKAS): The art and handicraft created by traditional artisans represents the true spirit of Atmanirbhar Bharat. A package of assistance for them has been conceptualized to enable them to improve the quality, scale and reach of their products, integrating them with the MSME value chain. This will greatly benefit the SCs, STs, OBCs, women and people belonging to the weaker sections; (c) Tourism: The sector holds huge opportunities for jobs and entrepreneurship for youth in particular. Promotion of tourism will be taken up on mission mode, with active participation of States, convergence of Government programmes and public-private partnerships; (d) Green Growth: India is implementing many programmes for green fuel, energy, farming, mobility, buildings, and equipment, and policies for efficient use of energy across various economic sectors. These green growth efforts help in reducing carbon intensity of the economy and provides for large scale green job opportunities.

What are the Priorities of the Union Budget 2023-24?

The Union Finance Minister has listed seven priorities of the Union Budget and said that they complement each other and act as the ‘Saptarishi’ guiding us through the Amrit Kaal. They are: (a) Inclusive Development; (b) Reaching the Last Mile; (c) Infrastructure and Investment; (d) Unleashing the Potential; (e) Green Growth; (f) Youth Power; (g) Financial Sector.

Priorities of Union Budget 2023-24

Source: PIB

What is the break-up of Government’s Revenue and Expenditure?

Revenues: The break-up of Government’s Revenues are: (a) Corporation Tax: 15%; (b) Income Tax: 15%; (c) GST: 17%; (d) Union Excise Duties: 7%; (e) Non-Tax Receipts: 6%; (f) Customs: 4%; (g) Non-Debt Capital Receipts: 2%; (h) Borrowings (Loans etc): 34%.

Expenditure: The break-up of Government’s Expenditure are: (a) Interest Payments: 20%; (b) States’ Share of Taxes and Duties: 18%; (c) Central Sector Schemes: 17%; (d) Centrally Sponsored Schemes: 9%; (d) Finance Commission and Other Transfers: 9%; (e) Defence: 8%; (f) Subsidies: 7%; (g) Pensions: 4%; (h) Other Expenditure: 8%

Break-up of Revenues Expenditure Union Budget 2023-24 UPSC

Source: Business Standard

Expenditure Union Budget 2023-24

Source: PIB

What is the core strategy adopted by the Union Budget 2023-24?

The Union Finance Minister chose to stick to the growth strategy that she first unveiled in 2019 when she announced a historic corporate tax cut. This growth strategy had two prongs.

Raising Capital Expenditure: Capital expenditure is the money that is spent on building productive assets such as roads, bridges and ports etc. Capital Expenditure has a greater return to the economy. The Budget has raised capital expenditure by the Government to INR 10 lakh crore. This is more than double the INR 4.39 lakh crore of 2020-21.

Fiscal Prudence: The Union Finance Minister has assured that the fiscal deficit will fall to 5.9% of the GDP. This is expected to have a salutary impact on the broader economy, as it suggests that money will be available for private entrepreneurs to borrow and invest.

Read More: Fiscal Deficit in India: Trends and Concerns – Explained, pointwise
What are the major highlights of UnionBudget 2023-24?

Fiscal Position: The Fiscal deficit target of 6.4% for FY2022-23 has been retained in the Revised Estimate for FY2022-23. The target for FY2023-24 has been reduced to 5.9% (INR 17.86 lakh crore). The medium-term target is to reduce Fiscal Deficit to 4.5% by FY2025-26.

Capital Expenditure (Capex): The Capital Expenditure has been hiked by 33% to INR 10 lakh crores (3.3% of GDP). The aim is to enhance growth potential and job creation, crowd-in private investments, and provide a cushion against anticipated global slowdown. The Effective Capital Expenditure is INR 13.7 lakh crore (includes provision made for creation of capital assets through Grants-in-Aid to States).

Railways: An outlay of INR 2.4 lakh crore provided for Railways in FY2023-24. It’s the highest ever highest ever allocation for Railways and is 9 times the amount allocated in FY2013-14.

Railway Union Budget 2023-24

Source: PIB

Defence Allocation: The allocation to defence sector has been hiked by 13%. Defence budget has increased to INR 5.94 lakh crore from last year’s INR 5.25 lakh crore. INR 1.62 lakh crore has been set aside for capital expenditure including purchases of new weapons, aircraft, warships and other military hardware.

MSMEs: Revamped credit guarantee for MSMEs will take effect from April 1, 2023 with infusion of INR 9,000 crore in corpus. The scheme would enable additional collateral-free guaranteed credit of INR 2 lakh crore and also reduce the cost of the credit by about 1%. An Entity DigiLocker will be set up for use by MSMEs, large business and charitable trusts for storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks and other business entities.

Banking: The Government has mooted amendments to the Banking Regulation Act to improve governance in banks.

EmploymentPradhan Mantri Kaushal Vikas Yojana 4.0, will be launched to skill lakhs of youth within the next 3 years covering new age courses for Industry 4.0 like coding, AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills etc. 30 Skill India International Centres will be set up across different States to skill youth for international opportunities. Direct Benefit Transfer under a pan-India National Apprenticeship Promotion Scheme will be rolled out. A Promotion Scheme will be rolled out to provide stipend support to 47 lakh youth in three years.

Clean Energy: The Union Budget 2023-24 has provided INR 35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security. To steer the economy on the sustainable development path, Battery Energy Storage Systems with capacity of 4,000 MWH will be supported with Viability Gap Funding. National Green Hydrogen Mission with an outlay of INR 19,700 crore will facilitate the transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports and enable India assume technology and market leadership.

Gems and Jewellery: To encourage the indigenous production of lab-grown diamonds, a research and development grant is to be provided to one of the IITs for 5 years. Basic customs duty on seeds used in the manufacture of Lab Grown Diamonds has also been reduced.

Aviation: 50 additional Airports, Heliports, Water Aerodromes, Advanced Landing Grounds will be revived to improve regional air connectivity.

Ease of Doing Business: The Government will bring another dispute resolution scheme Vivad Se Vishwas-2 to settle commercial disputes. PAN will be used as common identifier for all digital systems of Government agencies. One stop solution for reconciliation and updating identity maintained by various agencies will be established using digi locker and Aadhaar as foundational identity.

Central Processing Centre will be setup for faster response to companies through centralized handling of various forms filed with field offices under the Companies Act. Jan Vishwas Bill to amend 42 Central Acts have been introduced to further trust-based governance.

The Union Budget 2023-24 has announced multiple measures to enhance business activity in GIFT City.

Digital Services: Scope of services in DigiLocker will be expanded. 100 labs for developing applications to use 5G services will be set up in engineering institutions.

Bharat Shared Repository of Inscriptions will be set up in a digital epigraphy museum, with digitization of one lakh ancient inscriptions in the first stage. iGOT Karmayogi, an integrated online training platform, has been launched to provide continuous learning opportunities for lakhs of government employees to upgrade their skills and facilitate people-centric approach.

Phase 3 of e-Courts projects will be launched with outlay of INR 7,000 crore

Urban Development: Urban Infrastructure Development Fund (UIDF) will be established through use of Priority Sector Lending shortfall, which will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

Cities will be incentivised to improve creditworthiness for municipal bonds.

Under the NAMASTE (National Action Plan for Mechanised Sanitation Ecosystem) scheme, the Union government will endeavour to enable 100% mechanical desludging of septic tanks and sewers in all cities and towns.

Housing: Outlay for PM Awaas Yojana has been enhanced by 66% to over INR 79,000 crore. The Union Government will continue to provide 50-year interest-free loans to State Governments for one more year.

Tribal Welfare: Pradhan Mantri Primitive Vulnerable Tribal Group (PM PVTGS) mission is being launched to improve socio-economic condition on PM PVTGS. INR 15,000 crore will be spent over next three years for providing safe housing, sanitation, drinking water, and electricity to tribals.

Health: The Union Budget 2023-24 has announced an allocation of INR 89,155 crore for the Ministry of Health, which is just 3.43% higher than its FY2022-23 outlay of INR 86,200.65 crore.

A new programme for research in pharmaceuticals will be formulated and the industry will be encouraged to invest in research. A Mission to eliminate Sickle Cell Anaemia by 2047 will be launched, which will entail awareness creation, universal screening of 7 crore people in the age group of 0-40 years in affected tribal areas.

Education: 157 new nursing colleges will be established in colocation with the existing 157 medical colleges established since 2014. Eklavaya Model Residential Schools to be set up in the next 3 years. The Union Government will recruit 38,800 teachers and support staff for 740 schools serving 3.5 lakh tribal students.

National Digital Library will be set up for children and adolescents. States will be encouraged to set up physical libraries for children at panchayat and ward levels and provide infrastructure for accessing the National Digital Library resources.

Artificial Intelligence: Three Centres of Excellence for Artificial Intelligence to be set-up in top educational institutions to realise the vision of ‘Make AI in India and Make AI work for India‘.

Agriculture: An Agriculture Accelerator Fund will be set up to encourage agri-startups by young entrepreneurs.

A new sub-scheme of PM Matsya Sampada Yojana with targeted investment of INR 6,000 crore will be launched to further enable activities of fishermen, fish vendors, and micro/small enterprises, improve value chain efficiencies, and expand the market.

Digital Public Infrastructure for Agriculture will be built as an open source, open standard and inter operable public good to enable inclusive farmer centric solutions and support for growth of agri-tech industry and start-ups. Computerisation of 63,000 Primary Agricultural Credit Societies (PACS) with an investment of INR 2,516 crore has been initiated.

PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth (PM-PRANAM) will be launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers. Over the next 3 years, one crore farmers will get assistance to adopt natural farming.

To make India a global hub for ‘Shree Anna’, the Indian Institute of Millet Research, Hyderabad will be supported as the Centre of Excellence for sharing best practices, research and technologies at the international level.

500 new ‘Waste to Wealth’ plants under GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme will be established for promoting circular economy at total investment of INR 10,000 crore.

5% compressed biogas mandate will be introduced for all organizations marketing natural and bio-gas.

Atmanirbhar Clean Plant Program with an outlay of INR 2200 crore will be launched to boost availability of disease-free, quality planting material for high value horticultural crops.

Agriculture and Cooperatives under Budget

Source: PIB

Tourism: 50 tourist destinations will be selected through challenge mode to be developed as a whole package for domestic and international tourism. States will be encouraged to set a ‘Unity Mall‘ in State Capital or the most popular tourist destination in the State for the promotion and sale of ‘OneDistrict, One product‘ and GI products and other handicraft. Tourism infrastructure and amenities will be facilitated in border villages through the Vibrant Villages Programme.

What are the Tax proposals mentioned in Union Budget 2023-24?
Direct Taxes

To further improve tax payer services, it has been proposed to roll out a next-generation Common IT Return Form for tax payers’ convenience, along with plans to strengthen the grievance redressal mechanism.

Rebate limit of Personal Income Tax has been increased to INR 7 lakh from the current Rs. 5 lakh in the New Tax Regime (NTR). New Tax slabs have also been proposed under the NTR. Highest surcharge rate is proposed to be reduced from 37% to 25% in the NTR. This to further result in reduction of the maximum personal income tax rate to 39%. The NTR will be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the Old Tax Regime.

TDS rate will be reduced from 30% to 20% on taxable portion of EPF withdrawal in non-PAN cases.

Agniveer Fund will be provided EEE status. The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 are proposed to be exempt from taxes. (EEE stands for Exempt-Exempt-Exempt meaning part of income invested is exempted (not taxed), interest earned on investment is exempt and the investment at the time of withdrawal is exempt).

Direct Tax Proposals Union Budget 2023-24

Source: PIB

Indirect Taxes

The number of basic customs duty rates on goods, other than textiles and agriculture, has been reduced to 13 from 21.

Excise duty has been exempted on GST-paid compressed bio-gas contained in blended compressed natural gas.

Customs Duty exemption on specified capital goods/machinery for manufacture of lithium-ion cell for use in battery of electrically operated vehicle (EVs) has been extended to March 2024.

Indirect Tax Proposal Union Budget 2023-24

Source: PIB

Legislative Changes in Customs Laws

Customs Tariff Act will be amended to clarify the intent and scope of provisions relating to Anti-Dumping Duty (ADD), Countervailing Duty (CVD), and Safeguard Measures.

The CGST Act will be amended to raise the minimum threshold of tax amount for launching prosecution under GST from INR One crore to Two crore. It will also decriminalise certain offences.

What are other significant proposals in the Union Budget 2023-24?

Aspirational Blocks Programme covering 500 blocks launched for saturation of essential government services across multiple domains such as health, nutrition, education, agriculture, water resources, financial inclusion, skill development, and basic infrastructure.

New Infrastructure Finance Secretariat will be established to enhance opportunities for private investment in infrastructure.

National Data Governance Policy will be brought out to unleash innovation and research by start-ups and academia.

Mangrove Initiative for Shoreline Habitats and Tangible Incomes, (MISHTI) will be taken up for mangrove plantation along the coastline and on salt pan lands, through convergence between MGNREGS, CAMPA Fund and other sources:

Green Credit Programme will be notified under the Environment (Protection) Act to incentivize and mobilize additional resources for environmentally sustainable and responsive actions.

Amrit Dharohar Scheme will be implemented over the next three years to encourage optimal use of wetlands, enhance bio-diversity, carbon stock, eco-tourism opportunities and income generation for local communities.

National Financial Information Registry will be set up to serve as the central repository of financial and ancillary information for facilitating efficient flow of credit, promoting financial inclusion, and fostering financial stability. A new legislative framework will be designed in consultation with RBI to govern this credit public infrastructure.

To commemorate Azadi Ka Amrit Mahotsav, a one-time new small savings scheme, Mahila Samman Savings Certificate will be launched. It will offer deposit facility upto INR 2 lakh in the name of women or girls for tenure of 2 years (up to March 2025) at fixed interest rate of 7.5%.

What are the concerns associated with the Union Budget 2023-24?

First, Economists observe that the Income Tax exemptions under the Old Tax Regime promoted savings, which support investments. The New Tax Regime’s push towards consumption may hurt India’s savings rate.

Second, the funds allocated to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) have been slashed by ~32% for 2023-24 (INR 60,000 crore compared to the revised estimate of INR 89,400 crore for FY2022-23).

Third, As compared to FY22-23 when INR 3,200 crore was allocated to the Department of Health Research, the allocation has been reduced by 6.87%.

Fourth, Higher import taxes can have detrimental effects on the jewellery industry, including an increase in cases of corruption and smuggling.

Syllabus: GS III, Indian Economy.

Source: Indian Express, The Hindu, Business Standard, PIB

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