9 PM Daily Current Affairs Brief – July 26th, 2023
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Mains Oriented Articles
GS PAPER - 1
Himachal floods: a man-made disaster?
Contents
Source– The post is based on the article “Himachal floods: a man-made disaster?” published in “The Hindu” on 26th July 2023.
Syllabus: GS3- Disaster management. GS1- Geography
Relevance: Floods in mountains
News- Flash floods during this year’s monsoon season have caused unprecedented damage to both lives and assets in Himachal Pradesh.
How climate change is contributing to disaster?
As per IPCC VI report, the impact of climate change on Himalayas and coastal regions of India will be high. In the Himalayas, there is a noticeable pattern of increased precipitation occurring in shorter periods of time.
How anthropogenic factors have also significantly contributed to the disaster?
The State implemented its own development model after 1971.The focus of the model was land reforms, robust state-led investment in social welfare, and a strong emphasis on human resources.
However, things changed after liberalisation. Central government advocated for stringent fiscal reforms. It forced the mountain States to generate their own resources for fiscal management.
This led to the rapid construction of hydropower projects, widening of roads without proper geological and engineering assessments, expansion of cement plants, and a shift in agricultural practices to cash crop economies.
What are the impacts of hydropower generation?
Prior to 2000, multilateral agencies were opposed to financing large hydropower projects. But,they started providing funding for such ventures, making finance readily available for these projects.
These hydropower projects are one of the main reasons for the devastating impact of floods in the region.
The dams are based on “run of the river” technology. Water is diverted through tunnels burrowed into the mountains. The excavated material is disposed of along the riverbed
During periods of higher precipitation or cloudbursts, the water returns to the river. The dumped material is carried along with it.
Moreover, long tunnels have been commissioned on the Sutlej river. These are responsible for significant harm to the entire ecosystem.
Currently, there are 168 hydropower projects in operation. As per projections; by 2030, 1,088 hydropower projects will be commissioned to harness 22,640 MW of energy.
What are the impacts of tourism?
The development-driven road expansion is aimed at promoting tourism.
This development model follows a PPP approach. There is focus on completing these projects rapidly. Essential geological studies and mountain engineering skills are bypassed.
Traditionally, mountainous regions are not cut with vertical slits. They are terraced. It minimises the damage to the environment.
Unfortunately, vertical cutting of mountains has been done in case of four-lane projects in Manali and Shimla. It is leading to massive landslides and damage to existing roads.
How change in crop patterns is contributing to disasters?
Many farmers are now opting for cash crops instead of traditional cereal farming. It poses challenges in transporting these perishable crops to markets.
In response to this demand, roads are being hastily constructed without considering necessary factors like land cutting and gradient requirements.
Modern excavators are used in the construction process, but proper drainage systems and designated areas for muck disposal are not created.
It is important to note that while the total designated road length in the state is approximately 1,753 km, the total length of all roads, including link and village roads, exceeds 40,000 km.
Way forward-
An Inquiry Commission should be established to engage the main stakeholders for addressing both policy framework shortcomings and specific aspects of the undertaken projects.
A new approach is necessary to empower local communities and grant them control over their assets.
Losses incurred in culverts, village drains, small bridges, schools, and other social infrastructure must be compensated. It can be achieved through insuring the assets and entrusting their care to local communities.
It is essential for humans to take responsible actions in infrastructure planning to prevent the disasters witnessed by the State since June.
GS PAPER - 2
Welcome happening: Robust institutional mechanisms must be in place for human challenge studies
Source: The post is based on the article “Welcome happening: Robust institutional mechanisms must be in place for human challenge studies” published in “The Hindu” on 26th July 2023.
Syllabus: GS2- Issues relating to development and management of Social Sector/Services relating to Health, Education & GS4- compassion towards the weaker-sections.
News: The author discusses the need for strong institutional mechanisms and ethical considerations before conducting human challenge studies (CHIS) in India.
What are Human Challenge Studies (CHIS)?
Definition of CHIS: Human Challenge Studies (CHIS) involve intentionally exposing healthy volunteers to disease-causing microbes in a controlled environment for research purposes.
Purpose of CHIS: CHIS aims to study various facets of infections and diseases, test medical interventions, and accelerate vaccine development.
What are the benefits of CHIS?
Faster Vaccine Development: CHIS can accelerate vaccine development by providing critical data on immune responses and safety, reducing the need for large phase-3 trials.
Understanding Infections: CHIS helps researchers gain valuable insights into the various facets of infections and diseases, aiding in the development of effective treatments.
Controlled Environment: CHIS allows for the study of diseases in a controlled and monitored setting, minimizing risks to the wider population.
Cost-Effectiveness: CHIS can potentially reduce the cost and time required for vaccine development.
What are the challenges of CHIS?
Ethical Concerns: CHIS raises ethical issues related to the intentional exposure of healthy volunteers to disease-causing microbes.
Potential for Exploitation: Monetary incentives involved in CHIS may lead to the exploitation of volunteers.
Robust Institutional Mechanisms: Conducting CHIS requires well-trained personnel and strong institutional structures.
Previous Ethical Violations: Instances like the HPV vaccine trial in Andhra Pradesh (2010) highlight the importance of stringent oversight.
Limited Medical Intervention: CHIS may be unsuitable for studying novel diseases with limited medical interventions.
Child, law, and consensual sex
Source: The post is based on the article “Child, law, and consensual sex” published in “The Hindu” on 26th July 2023.
Syllabus: GS 2- Mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections
News: The author discusses the recent High Court judgements related to the POCSO Act of 2012. It highlights issues with interpreting the age of consent in cases involving minors and suggests the need for clearer guidelines and potential amendments to the act.
About POCSO Act, 2012
Read here: What is the POCSO Act?
What is the issue with the recent High Court judgement related to the POCSO Act of 2012?
Ignoring Age of Consent: The High Courts, in certain cases, overlooked the set age of consent. For instance, the Delhi High Court released an accused citing the 15-year-old girl’s willful involvement.
Consent Complexity: Judgments have given weight to the “consent” argument, even when involved parties were minors, like the Bombay High Court quashing a conviction involving a 17-year-old.
Not Prioritizing Vulnerability: The courts didn’t emphasize the vulnerability of minors or the potential power imbalances in relationships with significant age gaps.
Overlooking Consequences: In some judgments, the repercussions faced by the minors, such as early pregnancies, weren’t adequately examined.
Potential Precedent Issues: These varied judgments might set diverse precedents, leading to inconsistency in future case rulings.
Contrary to POCSO’s Objective: Some rulings might soften the act’s primary objective, which is to protect children from sexual offenses.
What should be done?
Clarity from Supreme Court: There’s a need for a clear directive or guideline from the Supreme Court to ensure uniformity in judgments.
Re-evaluate Age of Consent: Consider recommendations on reducing the age of consent from 18 to 16 but ensure this doesn’t expose adolescents to potential harm.
Data-driven Approach: The Bureau of Police Research and Development should analyze cases of consensual sex across states to help the Central government make informed decisions.
Best Interest of Child: Prioritize the ‘best interest of the child’ in all judgments.
Balanced Punishments: Re-examine the severe punishments under POCSO, ensuring they are deterrents but not excessively harsh.
Educate Judiciary: Conduct regular training sessions for the judiciary on the nuances of the POCSO Act.
C Raja Mohan writes: Why India may not be averse to UAE rescuing Pakistan’s economy
Contents
- 1 How has the relationship between Pakistan and the Gulf evolved over time?
- 2 Why is there scepticism that the current round of reforms advocated by the IMF will not be implemented by Pakistan?
- 3 Why is it not possible for Pakistan to continue with its business as usual approach?
- 4 How is the Gulf capital becoming important?
- 5 What is the current status of the triangular relationship between India, Pakistan and the Gulf?
Source– The post is based on the article “C Raja Mohan writes: Why India may not be averse to UAE rescuing Pakistan’s economy” published in “The Indian Express” on 26th July 2023.
Syllabus: GS2- International relations
Relevance: triangular dynamics between Middle east, India and Pakistan
News- According to media reports, the United Arab Emirates has offered to bring significant new investments that could help pull Pakistan out of its unending cycle of economic crises and bailout packages.
How has the relationship between Pakistan and the Gulf evolved over time?
The Arab Gulf enjoyed closer partnership with Pakistan. It was based on religious solidarity, regular economic assistance, concessional oil facilities, as well as cooperation on regional security.
Due to being a major Islamic nation, Pakistan enjoyed much goodwill in the Gulf. The Gulf rulers enjoyed exclusive privileges in sovereign Pakistan.
The balance between Pakistan and the Gulf has altered in the 21st century. The Gulf has become richer and Pakistan is becoming poorer by the day.
Pakistan’s per capita GDP today is less than that of Bangladesh.
Pakistan’s continuing relative economic decline has expanded the Gulf’s leverage over Islamabad and Rawalpindi.
Why is there scepticism that the current round of reforms advocated by the IMF will not be implemented by Pakistan?
Pakistan has a lack of political will for structural transformation of its economy. The Pakistani elite is not interested in economic reform. This is because of their confidence in extracting geopolitical rent from the US, China, and the Gulf.
The rental value of Pakistan is coming down. Pakistan is less important for Washington after the US withdrawal from Afghanistan.
China remains deeply invested in Pakistan. But, Islamabad is no longer in a strong position to keep a check on India. It has never been as generous as Washington.
The Gulf is not interested in giving freebies to Pakistan. It wants substantive return.
Why is it not possible for Pakistan to continue with its business as usual approach?
The US, in the past, persuaded international financial institutions to have a soft approach towards Pakistan. But, this time it wants the IMF to apply maximum pressure.
The Gulf states and China want Pakistan to get support from the IMF before they can provide financial assistance. Pakistan had no option but to submit to the IMF conditions.
The IMF wanted to ensure it had solid reform commitments from Islamabad.
How is the Gulf capital becoming important?
UAE, Qatar, and Saudi Arabia have emerged as powerful financial actors in the region due to oil wealth.
It has increased the political and strategic influence of the gulf across the Greater Middle East, Africa, the Indian Ocean and beyond.
South Asia is no exception. Emirati and Saudi capital is flowing into India. UAE and Saudi Arabia at the top of India’s most valued strategic partners.
What is the current status of the triangular relationship between India, Pakistan and the Gulf?
There has been significant change in the triangular dynamic involving India, Pakistan, and the Gulf countries.
In the past, Pakistan held stronger ties with the Gulf nations compared to India. However, the current scenario shows a shift in favour of India. India’s engagement with the UAE and Saudi Arabia has gained prominence. It has overshadowed Pakistan’s influence.
Despite Pakistan’s objections, the UAE invited India’s Foreign Minister Sushma Swaraj to address a meeting of the Organization of Islamic Cooperation (OIC) in March 2019.
Moreover, the UAE has refrained from criticising India’s decision to change the constitutional status of Kashmir in August 2019.
The UAE seems to have played a role in facilitating back-channel dialogues between India and Pakistan. It led to a ceasefire agreement in February 2021.
GS PAPER - 3
Oppenheimer’s project should inspire climate action urgency
Source: The post is based on the article “Oppenheimer’s project should inspire climate action urgency” published in Live Mint on 26th July 2023.
Syllabus: GS 3 – Environment
Relevance: measures needed to tackle climate change
News: The article explains different models that can be adopted to tackle climate change.
What are the different models present that can be replicated for climate change?
Oppenheimer/Manhattan model: Robert J. Oppenheimer led the Manhattan Project during World War II to build an atomic bomb. The project was completed under the given deadline.
This highlights that when the social return on an investment is higher than the private return, the government can run focused projects better than the private companies.
Hence, given the urgency of climate change, there are questions about whether the success of the Manhattan Project could be replicated in tackling this global emergency.
Apollo Programme: It was a successful US government initiative to send astronauts into space during the 1960s before the Soviet Union. NASA received funds an equivalent of 0.7% of GDP in the 1960s and employed 400,000 people to achieve the mission before the Soviet Union could.
As per the findings of research, the investment made by the government and technological assistance, increased productivity in US counties that already had relevant technology capabilities.
However, the impact on overall productivity across the entire US economy was limited.
Hence, a key takeaway from the study is that directing focused spending towards particular sectors to achieve specific geopolitical or climate objectives can potentially lead to enhanced productivity in those specific sectors.
However, its effect on the entire economy remains uncertain.
Can these two models be adopted for green transition?
A common objective in both the models was the need to accomplish a massive task under time pressure, requiring a substantial push, which is also required for green transition.
However, the government was the sole user of the new technology in both the models. Whereas the green transition requires a much broader adoption of new technologies across society, involving firms, cities, and citizens.
This presents challenges on both the demand and supply sides.
Must Read: Financing the Green transition: initiative and challenges – Explained
What can be the way ahead for green transition?
The practical approach to the green transition will involve targeted investments in new areas, a combination of subsidies and a carbon tax to encourage technology adoption, requiring efforts from both the state and the market.
However, there may also be a need to replace capital more quickly than normal, which carries risks. One such risk is governments’ ability to select technology more effectively through industrial policy than through market forces.
Hence, urgent action is needed to tackle climate change while taking all the factors into consideration.
What has flipped the forex reserve Decline of India?
Contents
- 1 What has caused a decline in the forex reserves?
- 2 What has caused an increase in the forex reserves this year?
- 3 Can India maintain these levels of foreign exchange reserves?
- 4 What is the global status of India’s foreign exchange reserves?
- 5 How are forex reserves measured?
- 6 What is the RBI’s strategy for diversifying its forex reserves?
Source: The post is based on the article “What has flipped the forex reserve Decline of India?” published in Live Mint on 26th July 2023.
Syllabus: GS 3 – Indian Economy – Growth & Development
Relevance: About India’s forex reserves
News: As of March 2023, India’s forex reserves stood at $578.4 billion, showing a decrease of over $28 billion since March 2022.
What has caused a decline in the forex reserves?
The decline in reserves was driven by the appreciation of the US dollar following the US Federal Reserve’s rate hikes, as well as India’s balance of payment (BoP), which experienced a reduction in net capital inflows.
However, this trend reversed after the dollar index peaked in October, and there has been an overall increase in the forex reserves this year compared to the last year.
What has caused an increase in the forex reserves this year?
The increase in forex reserves this year was primarily driven by revaluation gains due to a weaker dollar and higher capital inflows.
Additionally, the settlement of oil imports from Russia are not made in dollars, has also helped the reserves to increase.
Can India maintain these levels of foreign exchange reserves?
The US Federal Reserve’s rate hikes have resulted in foreign investments flowing into the US treasury and a simultaneous outflow of capital from India.
However, the US Fed has already raised rates by 75 basis points and it is expected to raise interest rates further by 25 basis points. This could potentially lead to increased capital inflows into emerging markets like India.
Moreover, India’s BoP has significantly improved, and the projected current account deficit is less than 2% of GDP. Equity capital flows have also revived, with India drawing the most of these flows among its fellow emerging market nations.
Hence, it is expected that India can maintain these levels of foreign exchange reserves.
What is the global status of India’s foreign exchange reserves?
India holds the fourth-highest forex reserves globally, with China, Japan, and Switzerland occupying the top three positions, respectively.
Unlike many countries that achieve a large current account surplus through competitive exports, India, Brazil, and the US have built their forex reserves mainly through capital flows, not relying heavily on current account surpluses.
How are forex reserves measured?
Read Here: India’s forex reserves rise $6.30 bn to $584.75 bn and Explained: Forex reserves at all-time high
The value of these reserves can change each week based on exchange rates and gold prices.
When the US dollar goes down or gold prices rise, the reserves increase in value. However, if the US dollar becomes strong or gold prices drop, the value of the reserves goes down.
What is the RBI’s strategy for diversifying its forex reserves?
The RBI aims to reduce reliance on foreign currencies by internationalizing the Indian rupee.
It is exploring the use of currencies from Asian Clearing Union member states, including the rupee, for payment and settlement between these countries.
Additionally, the RBI and the Central Bank of Sri Lanka have agreed to designate the rupee as a foreign currency, facilitating trade and enabling Indian tourists in Sri Lanka to use the rupee for transactions.
Moving away from the ‘take-make-dispose’ model
Source: The post is based on the article “Moving away from the ‘take-make-dispose’ model” published in “The Hindu” on 26th July 2023.
Syllabus: GS2- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests & GS3- Economy and Environment conservation
News: India prioritizes the circular economy and resource efficiency during its G-20 presidency. They’ve introduced themes like circularity in the steel sector; Extended Producer Responsibility (EPR); circular bioeconomy and establishing an industry-led resource efficiency and circular economy industry coalition.
What are the needs of circular economy?
- Circularity in the Steel Sector:
Reduction in Emissions: Steel production accounts for about 7% of global energy sector emissions. Adopting a circular model can drastically reduce this.
Resource Optimization: As the demand for steel rises, especially in growing economies like India, it’s essential to use steel efficiently to avoid wastage.
- Extended Producer Responsibility (EPR):
Waste Management: Over 20,000 Producers, Importers, and Brand Owners are registered under India’s EPR framework, managing over 3.07 million tons of waste.
Promotion of Recycling: EPR promotes the growth of recycling infrastructure and a streamlined waste collection system.
- Circular Bioeconomy:
Addressing Biowaste: G-20 countries have seen 2.5 times increase in biowaste since 1970.
Alternative Resources: India uses biowaste as raw materials, turning agricultural residue into bioethanol. This reduces the extraction of virgin resources.
- Industry-led Resource Efficiency and Circular Economy Coalition:
Collaborative Effort: Industries play a pivotal role in advancing the circular economy.
Technological Advancement: This coalition focuses on technological collaboration and finance mobilization.
Engaging Private Sector: By involving the private sector, the transition to a circular economy can be accelerated.
What are the government initiatives towards circular economy?
Extended Producer Responsibility (EPR):
India boasts a large Extended Producer Responsibility system.
Over 20,000 entities registered, managing 3.07 million tons of waste.
Bioeconomy and Biofuels:
Launched the Pradhan Mantri JI-VAN Yojana to support bio-ethanol projects using waste like crop residues.
Mandated power plants to blend 5% biomass pellets with coal.
GOBAR Dhan Scheme:
Converts cattle dung and organic waste into compost, biogas, and biofuels.
Over 500 functional biogas plants were established.
Alternative Fuels:
SATAT Scheme launched in 2018 promotes Compressed BioGas (CBG) as green transportation fuel.
Helps in infrastructure development for CBG production and distribution.
More capex for states
Source: The post is based on the article “More capex for states: Higher Central funds for states’ capital outlay are welcome, but these should lead to additionality” published in Business standard on 26th July 2023.
Syllabus: GS3- Indian economy – resource mobilization
News: In this article author discusses how India’s finance minister, Nirmala Sitharaman, has increased government’s capital expenditure over the years. However, some Indian states are not increasing their spending as much as expected, despite receiving more money from the central government. The author suggests this might be because states are using the extra money for other expenses, not for new projects.
About Government’s Capital Expenditure
Central Government’s Capital Expenditure
Steady rise over years: 1.67% of GDP in 2019-20 to 3.3% in the current year.
Last time it was over 3% of GDP was in 2004-05.
Aim: Upgrade infrastructure and boost private sector investment.
State Governments’ Capital Expenditure
Received ₹10,000 crore in 2021-22, by way of 50-year interest-free loan for capex, subject to the fulfilment of certain economic policy reforms by the state governments.
2022-23: States got ₹1 trillion of the total ₹7.5 trillion Central capex.
2023-24: States allocated ₹1.3 trillion out of ₹10 trillion.
Despite more funds, capital expenditure by states rose only 12% in 2022-23.
States with Increased Capital Expenditure:
Bihar: 29%, Chhattisgarh: 27%, Gujarat: 27%, Haryana: 17%, Jharkhand: 49%, Kerala: 13%, Maharashtra: 32%, Odisha: 45%, Tripura: 48%, Uttar Pradesh: 31%, West Bengal: 26%
States with Decreased Capital Expenditure:
Andhra Pradesh: 55%, Punjab: 17%, Rajasthan: 17%, Telangana: 38%, Assam: 20%, Nagaland: 18%
Singal digit growth in capital outlay – Tamil Nadu and Uttarakhand
Why did some states not spend more?
Covid pandemic reduced: States didn’t see the need for more capital projects to create jobs.
Shortage: Some states might have lacked executable projects or couldn’t handle more funds.
Misuse: Central support of ₹1 trillion might have been diverted. Instead of capital projects, states might have used it for other revenue schemes.
Financial strategy: States could use Central funds for capex targets and save their own resources for other plans. Example: Andhra Pradesh reduced capex by 55%.
What’s the concern for the future?
Slow Growth: Despite Central support, states’ capex growth was slow in 2021-22.
Unrealistic Projections: States project 37% growth in 2023-24, but past performance raises doubts.
Absorptive Capacity: States might lack the ability to effectively implement capital projects quickly.
Financial Jugglery: States might misuse Central funds, diverting them from capital projects to other schemes.
Express View: India’s road to 2047
Source– The post is based on the article “Express View: India’s road to 2047” published in “The Indian Express” on 26th July 2023.
Syllabus: GS3- Indian economy and growth
Relevance: Development model for high growth
News- In his Independence Day speech last year, Prime Minister Narendra Modi laid out his vision for India to achieve developed country status by the 100th year of its independence.
A recent study by economists at the Reserve Bank of India provides some clues on the growth trajectory needed to hit the target.
What are the prospects of India achieving the status of high income country?
India has a per capita income of $2,388 in 2022. It is currently classified by the World Bank as a lower middle income country.
As per IMF, the country’s per capita income is expected to rise to $3,720 by 2028. So, it is unlikely to achieve upper middle income status by the end of this decade.
Recent Reserve Bank of India study– Presently, the World Bank classifies countries with per capita incomes surpassing $13,025 as high income countries.
If inflationary effects are taken into account over the next few decades, a country’s per capita income would need to exceed $21,664 by 2047 to maintain high-income classification.
To reach this objective, the nominal per capita GDP in USD needs to increase at a yearly rate of 9.1 percent during this timeframe, which translates to 7.6 percent in real GDP terms.
However, achieving these growth rates poses a challenge. The study highlights that even during India’s most favourable 25-year period between 1993-94 and 2017-18, such growth rates were not achieved.
Way forward-
Countries that have achieved high income status have taken a conscious decision to industrialise and focus on external trade.
This is a challenge for the Indian economy. The level of merchandise exports has not reached the levels envisaged.
Manufacturing’s share should increase to 25% of value added. A business as usual approach is not sufficient.
The RBI study advocates for the urgent need to increase investments in the economy, reduce logistics costs, focus on skilling the labour force, investing more in health and education, and scaling up R&D.
Himachal floods: a man-made disaster?
Contents
Source– The post is based on the article “Himachal floods: a man-made disaster?” published in “The Hindu” on 26th July 2023.
Syllabus: GS3- Disaster management. GS1- Geography
Relevance: Floods in mountains
News- Flash floods during this year’s monsoon season have caused unprecedented damage to both lives and assets in Himachal Pradesh.
How climate change is contributing to disaster?
As per IPCC VI report, the impact of climate change on Himalayas and coastal regions of India will be high. In the Himalayas, there is a noticeable pattern of increased precipitation occurring in shorter periods of time.
How anthropogenic factors have also significantly contributed to the disaster?
The State implemented its own development model after 1971.The focus of the model was land reforms, robust state-led investment in social welfare, and a strong emphasis on human resources.
However, things changed after liberalisation. Central government advocated for stringent fiscal reforms. It forced the mountain States to generate their own resources for fiscal management.
This led to the rapid construction of hydropower projects, widening of roads without proper geological and engineering assessments, expansion of cement plants, and a shift in agricultural practices to cash crop economies.
What are the impacts of hydropower generation?
Prior to 2000, multilateral agencies were opposed to financing large hydropower projects. But,they started providing funding for such ventures, making finance readily available for these projects.
These hydropower projects are one of the main reasons for the devastating impact of floods in the region.
The dams are based on “run of the river” technology. Water is diverted through tunnels burrowed into the mountains. The excavated material is disposed of along the riverbed
During periods of higher precipitation or cloudbursts, the water returns to the river. The dumped material is carried along with it.
Moreover, long tunnels have been commissioned on the Sutlej river. These are responsible for significant harm to the entire ecosystem.
Currently, there are 168 hydropower projects in operation. As per projections; by 2030, 1,088 hydropower projects will be commissioned to harness 22,640 MW of energy.
What are the impacts of tourism?
The development-driven road expansion is aimed at promoting tourism.
This development model follows a PPP approach. There is focus on completing these projects rapidly. Essential geological studies and mountain engineering skills are bypassed.
Traditionally, mountainous regions are not cut with vertical slits. They are terraced. It minimises the damage to the environment.
Unfortunately, vertical cutting of mountains has been done in case of four-lane projects in Manali and Shimla. It is leading to massive landslides and damage to existing roads.
How change in crop patterns is contributing to disasters?
Many farmers are now opting for cash crops instead of traditional cereal farming. It poses challenges in transporting these perishable crops to markets.
In response to this demand, roads are being hastily constructed without considering necessary factors like land cutting and gradient requirements.
Modern excavators are used in the construction process, but proper drainage systems and designated areas for muck disposal are not created.
It is important to note that while the total designated road length in the state is approximately 1,753 km, the total length of all roads, including link and village roads, exceeds 40,000 km.
Way forward-
An Inquiry Commission should be established to engage the main stakeholders for addressing both policy framework shortcomings and specific aspects of the undertaken projects.
A new approach is necessary to empower local communities and grant them control over their assets.
Losses incurred in culverts, village drains, small bridges, schools, and other social infrastructure must be compensated. It can be achieved through insuring the assets and entrusting their care to local communities.
It is essential for humans to take responsible actions in infrastructure planning to prevent the disasters witnessed by the State since June.
Arvind Datar writes: With high GST on online games, death by taxes
Source– The post is based on the article “Arvind Datar writes: With high GST on online games, death by taxes” published in the “mint” on 25th July 2023.
Syllabus: GS3- Mobilisation of resources
Relevance: Issues related to taxation
News- The 50th GST Council has decided to levy 28% tax on the gross amount involved in online games.
What are the legal aspects related to games of skill and games of chance?
The law clearly distinguishes between games of skill and games of chance.
Games of chance, like roulette or lotteries, rely solely on luck or pure chance to determine the winner. These games are considered forms of gambling or wagering.
According to section 30 of the Contract Act, 1872, legal proceedings cannot be used to recover amounts due from such games.
Section 12 of the Public Gambling Act, 1867 states that games of skill do not fall under the category of gambling. In these games, the player’s skill plays a significant role, and luck or chance has little to no influence on the outcome.
What are issues related to the government ‘s move to levy 28% tax on gross amount involved in online games?
In the world of online games, taxes are not imposed on the entire pooled money. Instead, it is levied on the amount charged for the service provided.
The estimated annual GST collection from online games is around Rs 2,000 crore, which is only a fraction of the total annual GST collection of Rs 15 lakh crore.
The Revenue Secretary claims that the new rates will result in an increased collection of Rs 17,000 crore to Rs 20,000 crore. This would require online games worth over Rs 60,000 crore to be played. It seems highly unlikely.
Increasing tax rates does not guarantee a proportional increase in tax collected. The current taxation system focuses excessively on revenue maximisation.
While the GST collection from the gaming industry might seem modest, it employs a significant number of people directly and indirectly. These employees will pay GST on the goods and services they consume, which should not be ignored.
Implementing such a high GST rate is likely to benefit offshore gaming platforms with illegal activities. It could lead to the downfall of the gaming industry and substantial loss of employment without a significant increase in revenue
Resurgence of Inflation: Explained, pointwise
Contents
- 1 Introduction
- 2 What are the recent trends in inflation?
- 3 What are the signs of resurgence of high inflation?
- 4 What are the reasons for the recent inflationary trend?
- 5 What are the government policies to control inflation?
- 6 What are the recent government initiatives?
- 7 How effective are the policies to control inflation?
- 8 What alternative measures should be taken?
- 9 Conclusion
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Introduction
India went through a significant inflationary phase last year. Prices of food, especially tomatoes and cereals, are rising again. Recent inflation figures have also raised concerns regarding the resurgence of high inflation.
What are the recent trends in inflation?
The recent Consumer Price Index (CPI) data shows a rise in inflation with June’s CPI reaching a three-month high of 4.81 percent. But it is still below RBI’s upper tolerance limit of 6 percent.
Food prices are leading this surge, especially in the food and beverages sector, which makes up almost 46% of the CPI’s weight.
The food price inflation was broad-based with 10 of the 12 sub-groups witnessing year-on-year increases.
Specifically, cereals witnessed a 12.7 percent price gain, eggs rose by 7 percent, dairy by 8.56 percent, pulses by 10.5 percent, and spices by a sharp 19 percent.
Vegetable prices rose significantly in June, with tomatoes increasing by 64% from May.
What are the signs of resurgence of high inflation?
The year-on-year price rise happened in spite of a high base (June 2022 saw inflation at 7.01 percent) which is a clear sign of resurgence of high inflation.
Another sign is core inflation. It is calculated by excluding the more volatile components like food and fuel from CPI. It remained at 5.16 percent, barely moving from May’s 5.17 percent.
What are the reasons for the recent inflationary trend?
Erratic weather conditions: While the late arrival of the monsoon led to a large rain deficit till mid-June, heavy rains since the last week of June have caused significant damage to crops, primarily in Punjab and Haryana.
Weight of food and beverages in the CPI basket: This weight currently is 45.9 percent, and food alone is 39 percent. This is outdated and based on the 2011 consumption survey. Also, as per Engel’s law, with rising per capita income, people will spend less on food. Therefore, with the old weights, there is overestimation of CPI inflation.
Disease and Feed Costs: Milk production faced challenges from rising feed costs and lumpy skin disease.
Reduced Production: Tur inflation soared because of lower acreage and production. Weather conditions might further reduce pulse outputs in regions that depend on rainfall.
What are the government policies to control inflation?
Inflation is a complex phenomenon caused by several factors such as demand-pull factors, cost push factors and structural factors. Therefore, a mix of macro-economic policies are needed to manage the inflation in the economy.
Following are some policies governments use to deal with inflation:
Monetary Policy:
Limiting the money supply may help reduce inflation since the money supply and inflation are closely linked.
In 2016, Parliament amended the RBI Act, 1934 to change the monetary policy, and introduce an inflation targeting framework.
As per the new framework, the central government, in consultation with RBI sets: (i) an inflation target, and (ii) an upper and lower tolerance level for retail inflation. The target has been set at 4%, with an upper tolerance limit of 6% and a lower tolerance limit of 2%.
RBI adjusts its policy instruments, mainly the repo rate, to achieve this target.
Repo rate is the interest rate at which the RBI lends money to the banks. As such, it changes the interest rates in the whole economy.
Fiscal Policy:
The government can manage inflation through public expenditure and taxation.
The government can reduce inflation by raising the tax rates and thereby decreasing expenditure, demand, and inflationary pressures.
When inflation is high, the government reduces public expenditure. Decline in public expenditure affects private investment and results in decline of aggregate demand.
Other Measures:
Price controls: Under the Essential Commodity Act 1955, the government can declare a commodity as an essential commodity to ensure supplies to people at fair prices.
Export policy: The government can temporarily ban the export of certain items to improve their supply in the domestic market. The government also imposes Minimum Export Price (MIP) to discourage exports of commodities to ensure their availability in the domestic markets. Governments also allow duty-free imports of certain items to improve domestic supply.
Check over Speculation and Hoarding: The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980 allows for detention of persons engaged in activities like hoarding, creating artificial scarcities of essential commodities in the market and rigging up of the prices.
Ban on Futures Trading of Commodities: To reduce speculation – driven appreciation in prices, the government often bans futures trading of the commodities.
What are the recent government initiatives?
The government has recently banned the export of non-basmati white rice.
Earlier, the government banned the export of wheat and introduced stocking limits.
The government has directed two cooperatives — National Cooperative Consumers’ Federation of India (NCCF) and National Agricultural Cooperative Marketing Federation of India (NAFED) — to sell tomatoes.
How effective are the policies to control inflation?
Monetary policy: Monetary policy is effective in controlling inflation when there is excess demand, and the economy is overheating (demand-pull inflation). Higher interest rates lower inflation because loans become costlier.
But in India’s case it is the supply costs and bottlenecks that have created inflation (cost-push inflation). In such a scenario monetary policy is not very effective in taming inflation. In fact, a tighter monetary policy drags down GDP and pushes people out of employment, harming the real economy.
Fiscal policy: If government spending and taxation are used to enhance the productive capacity and efficiency of the economy, they can help mitigate cost-push inflation. Investments in infrastructure, education, and technology can improve productivity and reduce inflationary pressures.
Reducing government expenditure during periods of high inflation can help to dampen demand pressures in the economy, as less money is pumped into circulation.
Export Bans and Stocking Limits: India banned wheat exports in May 2022 and imposed stocking limits on traders. An export ban was also placed on white rice. Policymakers are using older strategies from the 1960s, which might not be suitable for current market dynamics. For example, despite the wheat export ban and stocking limits, wheat inflation is at 12.37 percent.
But the ban on rice exports may bring relief to Indian consumers because a shortfall in production is expected. Due to extreme flooding in the north and relatively poor rainfall elsewhere, rice sowing has declined this year.
What alternative measures should be taken?
Adjust Import Duties: Import duties on items like wheat should be reduced as cheaper imports can help control domestic prices.
Release Excess Stocks: The government holds more than 40 million tonnes of rice, much above the buffer stock norms of 13.5 MT. This excess stock should be unloaded by Food Corporation of India in the open market at reasonable prices.
Update the CPI Basket Weights: The weight of food and beverages in the CPI basket should be adjusted to reflect current realities as the weights are based on the 2011 consumption survey.
Enhance Processing Capacity: About 10-15 percent of perishable items like tomatoes and onions should be processed. The availability of alternatives like tomato paste and onion powder will help to stabilize prices.
Conclusion
Fiscal policy and monetary policy must work in tandem and be well-coordinated because sometimes one policy alone might not be sufficient to manage inflation effectively. These two policy tools are the primary components of a country’s macroeconomic policy framework, and their combined efforts can help achieve stable economic growth and price stability.
Sources: The Hindu, Indian Express
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