9 PM Daily Brief – October 5, 2020

Good evening dear reader.

Here is our 9pm current affairs brief for you today

9 PM for Mains examination

GS-2

1.NCPCR analysis

2. The future of GST hangs in the balance

GS-3

3. India’s inflation targeting policy
4. Insolvency and Bankruptcy Code (IBC 2016)
5. India’s inflation targeting policy
6. Power sector in India
7. The non-violent economic model
   

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9 PM for Preliminary examination

FACTLy

1.NCPCR analysis

Source: The Hindu

Syllabus: GS-2- Polity

Context:  Recent actions of NCPCR suggest a serious parting from its primary duty to ensure the well-being of all children.

What is NCPCR? What are the concerns related to it?

• The National Commission for Protection of Child Rights (NCPCR) is the top body for upholding, monitoring and facilitating child rights in the country.
• Directions by NCPCR: The NCPCR directed District Magistrates in eight States to ensure that all children within CCIs be de-institutionalised, repatriated and rehabilitated within a specified period.
• An instructed repatriation without an adequate case-by-case assessment plan within a short period of time would likely place the children again at grave risk of abuse, exploitation and neglect.
• They also point to the absolute inadequacy of current systems to organise adoption and foster care.
• Selective Raids: Disturbing report of raids being undertaken by the NCPCR in select NGO-run CCIs, in order to establish whether foreign funds have been misused in any manner.
• Monitoring of the FCRA regulations is outside of the mandate of the NCPCR.
• The raids also targeted individuals who have been outspoken in the criticism of the Central government on issues such as the National Register of Citizens and the Citizenship (Amendment) Act.
• Communal overtones: An enquiry led by the Chairperson enquired into whether the previously homeless children in the CCIs belonged to a particular community (Rohingya), even as the institutions are known to be secular.
• Increase in problems due to pandemic: Existing issues of child malnutrition, child labour, child abuse, child marriage and mental illness have increased.

Way Forward

• The NCPCR could have used its authority and power to issue recommendations to relieve these grave conditions by strengthening child-related institutions through adequate funds, and appreciating the relief measures that many civil society organisations were engaged in.
• The NCPCR was expected to take a stand on the rape and murder of a 14-year-old girl in Bhadohi in Uttar Pradesh, to make a test case of the lack of systems to fight crimes against children.
• CCIs need monitoring and reforms: The Commission should be on the front to ensure the support that would necessarily be required to implement these reforms.

2.The future of GST hangs in the balance

Source: The Hindu

Syllabus: Gs2: Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein.

Context: The Centre needs to raise additional resources to bridge the GST compensation gap.

What is the GST compensation issue?

• In 2017, the Centre made a promise to the States that a certain minimum amount of GST revenues will be guaranteed to every State for every year until 2022.
• It was hailed as a harbinger of ‘cooperative federalism’.
• However, there is not enough money in the GST kitty for the Centre to honour this obligation.

What is proposed by the centre to bridge the gap?

• The Centre has proposed that the States should borrow money.
• Centre will act as a guarantor to facilitate this borrowing.
• Many States have accepted this proposal while many others have rejected it and implored the Centre to borrow.

How States have responded?

• Gujarat and Karnataka support the Centre’s proposal while Maharashtra and Tamil Nadu have opposed it.
• GST compensation constitutes a significant share of the revenues of Punjab and Himachal Pradesh, yet Himachal Pradesh supports the Centre’s plan while Punjab is against it.
• Rajasthan and Haryana have similar sized fiscal deficits. Rajasthan is apprehensive but Haryana is ready to indulge in more borrowing.

What are the implications of GST compensation issue?

• Erosion of credibility: There is a bitter stand-off between the Centre and these protesting States.
• Widening trust deficit: Recently Comptroller and Auditor General revealed that in the last few years the Centre mis-allocated nearly Rs. 3 lakh crore. It was collected through various cesses to reduce the States’ share of tax revenues.
• Politicisation of the GST Council: Twenty members of the GST Council that have agreed to the Centre’s proposal are governed by the Bharatiya Janata Party (BJP) or a BJP alliance. The 11 States that have opposed the Centre’s plan are all governed by the Opposition.
• Against cooperative federalism: The 11 opposing States account for a greater share of overall GST revenues than the 20 supporting States. However, it does not matter since every State, large or small, has equal weight in the GST Council.

How Centre can increase tax revenue?

• Centre can Increase taxation of capital market transactions.
• Between April and June, India’s stock markets experienced its highest activity levels in its history, with a 75% increase in transactions vis-a-vis last year.
• The stock market rose 30% in this period and a minority few profited.
• The Centre can levy a higher tax on such speculative stock market trading to earn additional revenues during these difficult times, which will also not hurt the economy like an increase in GST rates or cess will do.
• Also 15 years of data show there is no evidence that in India raising securities transaction taxes adversely impacts stock market activity or the overall economy.

GST compensation is an economic issue and should be settled based on what makes the most economic sense for each State and for the nation overall.

3.India’s inflation targeting policy

Source – Live Mint

Syllabus- GS-3 Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context- Inflation targeting and the decisions of  Monetary Policy Committee (MPC).

What causes inflation?

The primary cause of inflation is the mismatch between demand and supply. The mismatch can be in following context-

1. Excess money supply that raises aggregate demand
2. Supply deficiency (A shortfall in the production of a commodity fails to meet even the basic needs of the citizens and thus prices raise causing inflation).

What is the new monetary framework?

The agreement between the Reserve Bank of India (RBI) and the central government signed in February 2015. The agreement explicitly made inflation targeting the objective of the MPC while using the repo rate as the instrument for it.

• Rate steady– The Reserve Bank’s MPC was given the target of keeping inflation at 4% with a tolerance limit of 2%. This meant that inflation should be between 2% and 6%.
• Contrasting target – The target was in contrast with the multiple indicator approach that predated this framework where the central bank focused on both growth and price stability.

Thus, RBI was finally free to do its core job as guardian of the rupee’s value and granting currency the stability needed to serve as a credible unit for long-range forecasts.

What is inflation targeting? What are the views of critics?

Inflation targeting refers to keeping inflation rate within the permissible band so that business houses can plan their investment activities.

Procedure-

1. Review meeting– (every two months): Where MPC discuss the likely inflation and growth estimates over the coming months.
2. Targeting inflation: Based on this review, the MPC targets inflation using the policy rate, or the repo rate.

Critics’ view-

• Inflation targeting was ill-suited to an emerging economy like India.
• Flexible regime with a wide inflation band was far too rigid to foster growth.

Inflation in India has been subdued since the new monetary policy framework was brought in. Many view this as a sign of its success in India while others point at the tight policy and its adverse impact on India’s growth rate as a sign of problems with the framework, which has come at the cost of growth.

Way forward

Centre must not act in haste to abandon inflation targeting. Price stability is a goal too worthy to give up on. For the sake of fairness, if not the rupee, government should resist the temptation to use the “money illusion” of inflation for short-term ends.

Read also:-  Daily Current Affair

4. Insolvency and Bankruptcy Code (IBC 2016)

Source: The Hindu

Syllabus: Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment

Background: The Prime Minister mentioned that Insolvency and Bankruptcy Code (IBC 2016) would help aid India’s path to self-reliance.

What are the issues hindering investments in India?

• Backlog in court cases: nearly four crore matters pending final judgment.
• The enforceability of contracts: On an average, it takes 1,445 days for a contract to be enforced, and that too at a cost of nearly 31% of the claim value.
• Criminal penalties: imprisonment for minor offences act as major deterrents for investors.

What is the importance  of IBC in promoting investment climate in India?

• Replaced the inefficient bankruptcy law regime.
• It has transformed insolvency resolution in India by streamlining insolvency processes in a sustainable, efficient, and value retaining manner.
• It focuses on prioritising resolution rather than liquidation.
• Relatively short time-bound processes. With IBC in place, the overall time taken in recovery improved nearly three times. (4.3 years in 2018 to 1.6 years in 2019).
• It has successfully instilled confidence in the corporate resolution methodology.
• Increased the possibility for the creditors in recovering some of their investments in firms being liquidated. With IBC in place, the recovery rate improved nearly threefold (26.5% in 2018 to 71.6% in 2019).
• Beside promoting investor and investee confidence it has allowed credit to flow more freely to and within India.
• IBC reforms improved the ease of doing business in India that resulted in increased Foreign Direct Investment into India during 2019-2020.
• Instilled greater confidence in both foreign and domestic investors. It will help in enabling India to emerge as a ‘Make for World’ platform.

What are the other steps taken by government to promote investments?

• Government of India is working toward decriminalisation of minor offences which will significantly reduce the risk of imprisonment for actions that are not necessary.
• The rolling out of the commercial courts, commercial divisions and the Commercial Appellate Divisions Act, 2015, to resolve pending cases
• The removal of over 1,500 obsolete and archaic laws.

5. India’s inflation targeting policy

Source – Live Mint

Syllabus- GS-3 Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context- Inflation targeting and the decisions of  Monetary Policy Committee (MPC).

What causes inflation?

The primary cause of inflation is the mismatch between demand and supply. The mismatch can be in following context-

1. Excess money supply that raises aggregate demand
2. Supply deficiency (A shortfall in the production of a commodity fails to meet even the basic needs of the citizens and thus prices raise causing inflation).

What is the new monetary framework?

The agreement between the Reserve Bank of India (RBI) and the central government signed in February 2015. The agreement explicitly made inflation targeting the objective of the MPC while using the repo rate as the instrument for it.

• Rate steady– The Reserve Bank’s MPC was given the target of keeping inflation at 4% with a tolerance limit of 2%. This meant that inflation should be between 2% and 6%.
• Contrasting target – The target was in contrast with the multiple indicator approach that predated this framework where the central bank focused on both growth and price stability.

Thus, RBI was finally free to do its core job as guardian of the rupee’s value and granting currency the stability needed to serve as a credible unit for long-range forecasts.

What is inflation targeting? What are the views of critics?

Inflation targeting refers to keeping inflation rate within the permissible band so that business houses can plan their investment activities.

Procedure-

1. Review meeting– (every two months): Where MPC discuss the likely inflation and growth estimates over the coming months.
2. Targeting inflation: Based on this review, the MPC targets inflation using the policy rate, or the repo rate.

Critics’ view-

• Inflation targeting was ill-suited to an emerging economy like India.
• Flexible regime with a wide inflation band was far too rigid to foster growth.

Inflation in India has been subdued since the new monetary policy framework was brought in. Many view this as a sign of its success in India while others point at the tight policy and its adverse impact on India’s growth rate as a sign of problems with the framework, which has come at the cost of growth.

Way forward

Centre must not act in haste to abandon inflation targeting. Price stability is a goal too worthy to give up on. For the sake of fairness, if not the rupee, government should resist the temptation to use the “money illusion” of inflation for short-term ends.

6. Power sector in India

Source- The Indian Express

Syllabus- GS 3- Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Context– The financial hole into which the DISCOMS have fallen will deepen in light of COVID.

What is UDAY scheme?

• Launched in November 2015, the Ujjwal DISCOM Assurance Yojana (UDAY) was designed to turn around the precarious financial position of state distribution companies (DISCOMS).
• The state governments took over 75 % of the debt of their DISCOMS, issuing lower-interest bonds to service the rest of the debt.
• In return, DISCOMS were given target dates (2017-19) to meet efficiency parameters like reduction in power lost through transmission, theft and faulty metering.

What is the current situation of State Electricity Distribution Companies DISCOMS in India?

DISCOMS today are facing unprecedented cash flow problems-

1. Loss–

• The losses of DISCOMS, which had reduced in 2016-18, have nearly doubled in 2019 to INR 28,036 crore.
• DISCOMS have also missed the FY 2019 UDAY target to bring down their aggregate technical and commercial (AT&C) losses to 15 %.

2. The finance minister allocated Rs 1.25 lakh crore to DISCOMS in her Rs 20-lakh crore stimulus package. This is roughly the amount the government portal, PRAAPTI, indicates are the dues owed by DISCOMS to the power generators.

What were the reasons for failure of UDAY scheme?

1. While the ACS-ARR gap was supposed to be eliminated by FY19, it remains as high as Rs 0.25 per unit.
   1. Part of the problem can be traced to inadequate tariff hikes. Currently, only four states — Himachal Pradesh, Gujarat, Maharashtra and Karnataka — had recorded an ACS-ARR below 0.

2. The issue of whether the power subsidy released by state governments is adequate.
3. Dues by state DISCOMS to power generators have risen.

What are the fundamental problems in DISCOM sector in India and it’s possible Solutions?

1. Cross- subsidy– Electricity price for certain segments such as agriculture and the domestic category is cross-subsidized by the industries and the commercial sector. This affects the competiveness of industry.
2. Led behind in eliminating the electricity cost gap– There is the problem of AT&C, which is a technical term that stands for the gap between the cost of the electricity that DISCOMS gets from the generating company, the bills that it raises and the final realization from the collection process from end-consumers.

Solution-

3. Clearing dues– The stakeholders involved in the electricity value chain (generators, transmission companies, DISCOMS, consumers, regulators and state governments) to clear their dues to each other, the DISCOMS would look much stronger.
4. Efficiency– The AT&C (aggregate transmission and distribution losses) losses need to go down, and billing and collection efficiencies should go up.

Way forward

Need of an hour is a multi-pronged and networked overhaul of the DISCOM sector and, in particular, the regulatory structure and deliverables. All stakeholders will have to take a haircut. COVID will introduce a new pressure point (i.e. Generation Z and the millennial) on governments that would compel them to look at the inherited structural problems through a different angle.

7.The non-violent economic model

Source- Live Mint

Syllabus- GS 3- Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context– The year of corona may yet shift the focus from Gandhi as an icon of political protest to Gandhi as a far-sighted economic thinker.

What were the ideologies to solve the economic problems during the Great Depression, 1930?

1. John Maynard Keynes- People must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still.
2. Mahatma Gandhi- The charkha and rejuvenation of local economies. Gandhi’s primary focus was on the profound structural violence unleashed by this assumption that lies at the heart of modernity.
3. David Graeber, American anarchist philosopher and anthropologist– He was credited with inspiring the Occupy Wall Street movement and coining the evocative term “99% vs. 1%” to describe wealth disparity.

Thus, Non-violent economics shifts the focus from wealth distribution to difficult questions about what constitutes value and how it might be measured.

What are the developments on the world stage that created hope of overturning the worship of greed?
Over the last 30 years, there were two major developments-

1. The rise of the free or open software movement– The open software movement gifted us the World Wide Web when its creator Tim Berners-Lee refused to patent its protocols.

However, the democratizing and decentralizing potential of the web has been cannibalized by Google, Facebook, etc.

2. Manipulation – Today’s internet giants use their manipulative power that could undermine mental health and democratic institutions across the world.

Is there any hope for a non-violent economy?

1. COVID – It might serve as a wake-up call for leaders and foot soldiers of the current global disorder. The link between environmental degradation and proliferation of ever-more-deadly pathogens is more widely acknowledged.
2. If value is equated with money– People are shockingly vulnerable as long as value is equated with money. If supply chains break down for long enough, even millionaires are in danger of starving.
3. GDP as a measure– It is now more widely recognized that gross domestic product (GDP) as a measure of economic activity is grievously misleading. For instance, it doesn’t take into account the negative externalities of using fossil fuels.
4. Green accounting and HDI- Creating a combined measure that tracks social(HDI) and environmental well-being(green accounting practices) is now a survival imperative.

Way Forward

Bhutan’s gross national happiness mechanism, the genuine progress index (GPI) developed by think-tank GPI Atlantic etc hold promise because instead of directly attacking the “foul is fair” assumption by seeking to make it less lucrative.

9 PM for Preliminary examination

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