9 PM Daily Brief – 15 April 2016

Brief of newspaper articles for the day bearing
relevance to Civil Services preparation

What is 9 PM brief

• GS PAPER 2
  1. Trust in states’ fiscal responsibility vindicated {14th Finance Commission}
• GS PAPER 3
  1. The tip of the the tip of the iceberg {Black money}
  2. Law to increase workers’ bonus faces fresh hurdle {Labour Laws}
  3. Resistance to reforms vanishing: Jaitely {Reforms}
  4. Name of the bill {Aadhar Bill}
  5. Why doubling of farmers’ income by 2022 is possible {Agriculture and farm income}

---

GS PAPER 2

---

[1] Trust in states’ fiscal responsibility vindicated

Livemint

Issue

States have followed recommendations of Fourteenth Finance Commission (FFC) and conducted themselves with a due sense of fiscal responsibility.

Suspicion over the capability of the states

• When FFC recommended the increase in the states’ share of the divisible pool of tax revenues from 32% to 42%,  fears were expressed that states were fiscally irresponsible.
• Many commentators felt that the recommendations dangerously altered the fiscal balance of power in favour of states, transferring huge additional resources to them.
• It was said that states will throw away  resources on handouts or poorly designed projects that allow for malfeasance and leakage, thereby putting fiscal stability at risk.
• It was also argued that with greater devolution, the poorer states would be the worst sufferers.

Intent of the FFC behind this move

• It attempted  to restore a long recognized imbalance between the assigned constitutional responsibility of states, the state list of the Seventh Schedule under Article 246, and the actual allocation of the divisible pool of resources between the Union and state governments.
• While doing so, it kept in mind the Union government’s resource requirements to deal with the subjects on the Union list, or those on the concurrent list for which the Union government has a leading responsibility.
• It ring-fenced adequate fiscal space for the Union government to fulfil its responsibilities.
• FFC did not increased the share of total resources transferred to states but simply altered its composition.

How did it managed to altered the Composition of resources?

• It raised the share of untied transfers through tax devolution as opposed to tied transfers, especially in the form of top-down, micro-designed centrally sponsored schemes (CSS).

Did it worked for the States?

• The change in the composition of transfers in favour of untied tax devolution as compared to tied transfers has indeed fiscally empowered states quite significantly.
• State governments have to be fiscally responsible because the Union government and RBI effectively control states’ borrowing programmes and thereby enforce a hard budget constraint on states in line with their respective FRBMs.
• Since the enactment of their respective state level Fiscal Responsibility and Budget Management (FRBM) Acts, most states have been quite fiscally prudent.
• According to a study, there have been very significant increases in total social spending in all states during 2015-16.
• At the same time all these states, including the low-income states, have substantially increased their allocations for social services.
• Clearly, the trust placed by FFC in their sense of fiscal responsibility has been fully vindicated by the states.

---

GS PAPER 3

---

[1] The tip of the the tip of the iceberg

The Hindu

Already discussed in earlier click first ,  second

What is the implication of taking money out to a tax haven and not keeping it in India?

• Inequity rises because of tax evasions that leads to poor infrastructure and higher indirect taxes.
• Indian tax rates are moderate unlike Japan and other countries where tax rate is 50%. So amount of tax is not the reason to hide money abroad.
• This rising injustice and inequity is because almost all political parties and/or people close to them are involved in this activity.
• It is a matter of greed and ethics.
• So problem lies in India not abroad.  

[2] Law to increase workers’ bonus faces fresh hurdle

The Hindu

What happened?

• 8 High Courts have stayed the retroactive provisions of a law concerning Payments of Bonus.

Which Law?

• The Payments of Bonus Act of 2015
• It has doubled the statutory bonus paid to employees and made more workers eligible for bonus by raising the salary ceiling under the law from Rs.10,000 a month to Rs.21,000 a month.
• The government tried to  appease the working class, as it was passed retrospectively with  effect from April 2014.

Stand of the Union Government

• The Payment of Bonus law is in the interest of the crores of workers and was unanimously supported by political parties in Parliament.
• It is an incentive for the industry as giving bonus to workers will lead to more productivity.

Stand of the Industry

• It has warned the government about the financial implications of the retro-active amendments on employers.
• Distributing bonus for the previous year after the books of accounts are closed is a difficult prospect.
• Companies have already distributed the bonus for 2014-15 to its workers.

 

[3] Resistance to reforms vanishing: Jaitely

The Hindu

News

Finance ministry said

 

• India’s economy grew at 7.5 per cent in 2015-16 fiscal year, which is impressive related to current global standards, but considering the requirement of India, it was “not good enough”.

• Current govt has three-pronged approach — “being decisive, consistent and transparent.”.
• The government kept significant part of the revenue gained from lower oil prices and diverted it to social sector and infrastructure.
• Agriculture was and is a priority for the government and public spending in the sector would continue.
• Growth is not the only thing to be sufficient for India, but have to see whether growth is reducing and eliminating poverty or not with creating more jobs. In turn helping Indian villages? How much it is trickling down?
• Finally finance ministry is assuring people that “it may take time but it will happens”.

 

[4] Name of the bill

Indian Express

Context

• The amendments made by the Rajya Sabha were rejected and the Aadhaar bill was passed as a money bill.

What is a money bill

• A money bill is a bill where Rajya Sabha or the Upper House has no authority to amend it in any way.
• There are six condition for a bill to be a money bill and they pertain to taxes, government borrowings and expenditure
• Article 110 talks about money bill and the matters exclusively contained in that are called money bill
• The Lok Sabha may or may not accept the recommendations of the Rajya Sabha
• If Rajya Sabha does not even return the bill in 14 days, it is considered passed in both houses. President can withhold assent to money bill but cannot return it for reconsideration of the Lok Sabha.
• There is no question of joint sitting in case of money bills because opinion of Rajya Sabha is immaterial in their case

What was the criticism

• The Aadhar bill was passed in lok Sabha as money bill although it contained non money matters
• The responsibility of the Rajya Sabha is seen a revising chamber and provides for a check on quick decisions made by the lok Sabha
• A writ petition has been filed in the Supreme court challenging the classification of the bill as money bill

Following the procedure of the british parliament

• All the government expenses were sanctioned by the parliament in Britain and any no new taxes were not imposed on the masses without the approval of the parliament.
• The majority required in the parliament to pass a law is important because the government in power is expected to resign if it does not have the majority or the confidence of the parliament.
• The money bill are an exception and need only Lower house to pass the legislation

An excerpt from Erskine May: Parliamentary Practice

• “A bill which contains any of the enumerated matters and nothing besides is indisputably a ‘money bill’. If it contains any other matters, then, unless these are ‘subordinate matters incidental to’ any of the matters so contained in the bill, the bill is not a money bill. Further, if the main object of a bill is to create a new charge on the Consolidated Fund or on money provided by Parliament, the bill will not be certified if it is apparent that the primary purpose of the new charge is not purely financial.”

What is Erskine May: Parliamentary Practice

• Sometimes referred to as “Parliamentary Bible”, a book on parliamentary procedure, it is rule book for parliamentarians

Issue with Aadhaar

• It contains biometrics for identification purposes, subsidies and government services are provided through it and many other opportunities and purposes are there for the Aadhaar, therefore according to the definition given above in book excerpt, Aadhaar does contain matters that are extra and non money and are not expenditures on the consolidated fund of India

About Speaker

• Indian Parliament have a Speaker who is the authority to classify a bill as money bill or as not a money bill and the decision is final, but in British parliament, whose procedure we follow, has two senior members in House of Commons who are consulted before the speaker classifies a bill

Cases where decision of speaker was challenged in court

• Once in anti defection law and recently where Supreme repealed the expulsion of Amarinder Singh from Punjab legislative assembly.

Solution

• Although we have to see if the Supreme Court considers the petition but there has to be a way to which makes way for a consultative mechanism with the Upper House before a bill is classified as a money bill.
  

 

[5] Why doubling of farmers’ income by 2022 is possible

Indian Express

Context

• Ways to double farmer’s income by 2022, which coincides with the 75 years of India’s independence, among the slew of criticisms

What happened

• PM announced his desire to double the income of farmers by 2022 in February 2016
• Also the FM announced this in his budget speech

What is the criticism

• It’s impossible and unrealistic
• An annual growth of 14.86% is required to achieve the target, which India has never had since its agriculture history

What is to be doubled

The “income” of the farmers in real terms of the agriculture year 2015-16 by 2022-23

What is being experienced currently

• Wholesale price index(WPI) based inflation for agricultural prices has grown by 5% in 2015-16(meaning that real farm income has risen by 5%)
• But for non agricultural prices it has declined
• So the real growth of farmers income is same as in nominal terms

What is Wholesale Price Index

• The Wholesale Price Index or WPI is “the price of a representative basket of wholesale goods”
• The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

How can it double

• Diversification towards high value crops
• Better irrigation can double the productivity
• Improved framework where farmers are more likely to get better prices for their produce
• Technology upgradation
• Shift of cultivators from farming to non farming occupation

• Per unit cost savings in technology, the cost of input, wages and labour
• If increase in prices of farm products to non agriculture commodities is more
• High Inflation in agricultural prices can double the income earlier
• An actual 10.4% annual growth is required and not 14.86%

See a related article Rebooting India’s agricultural policy

---

1. The lead article of the day is covered under Editorial Today. Click here to read.

2. Science and Technology and Environment articles has been left out, they will be covered in weekly compilation for next week.

---

BY: ForumIAS Editorial Team