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SECURE SYNOPSIS: 29 May 2017

 


SECURE SYNOPSIS: 29 May 2017


NOTE: Please remember that following ‘answers’ are NOT ‘model answers’. They are NOT synopsis too if we go by definition of the term. What we are providing is content that both meets demand of the question and at the same time gives you extra points in the form of background information.


General Studies – 1;


Topic: Poverty and developmental issues

1) How did India manage food shortage problem in 1970s? Examine. (200 Words)

The Indian Express

Introduction :- India was not technologically developed on Independence. Despite very good annual agricultural growth form 1956-65 of 3% per annum, India had been facing food shortages. Agricultural growth was not promising as demand was rising with population at 2.2% per annum from earlier 1%.
Indian market was not able to meet the demand fully and then India started importing form U.S from 1956 under PL-480 scheme. Later it turned to be a wrong step as reasons behind this are :-

  • Increasing dependence on food from U.S, Indo-Sino(1962),Indo-Pak(1965) war and two successive famines(1965-66) further aggravated the situation.
  • S was bullying India to change its policies toward its favour as Mr. Johnson tried to put India on short leash.
  • S also threatened India to renege on the promise of food supplies.

Steps taken to overcome the situation by India:

  • Then P.M, Lal Bahadur Shashtri and his successor Indira Ghandi and Food Minister, C. Subramanian all gave boost to transition of India to be self sufficient in food supplies.
  • Green Revolution which came with critical imports of HYV(High Yield Variety Seeds) form Mexico, Chemical Fertilizers, Pesticides, Agriculture Machinery(Tractors, pump sets),soil testing facilities and agriculture related education programmes and appropriate credit were first concentrated on the areas of assured irrigation.
  • investment in agriculture sector increased to almost double.
  • Agriculture prices commission was set up and efforts being made to check that farmer was assured with market at sustained remunerative price.
  • Gross irrigated area rate also increased to 2.5 million hectares from 1 million hectares per annum during 1970.
    The Results of this new strategy began to be witnessed within a short period and since then India became self sufficient in food supplies.

 


General Studies – 2


Topic: Important International institutions, agencies and fora- their structure, mandate.

2) Analyse threats faced institutions today that were built the post World War II. Do you think China’s BRI initiative can be compared to these institutions? Comment. (200 Words)

The Hindu

Livemint

Introduction :-  Chinese investments related to the Belt and Road initiative have totalled to $60 billion since 2013 and Beijing plans to invest $600 billion to $800 billion in the next five years. China Development Bank and the Export-Import Bank of China have extended USD 110 billion in loans for Belt and Road projects by the end of 2016 and China has signed currency swap deals with countries along the Belt and Road routes totalling 900 billion yuan. 
In terms of scale or scope, OBOR has no parallel in modern history. It is more than 12 times the size of the Marshall Plan, America’s post-World War II initiative to aid the reconstruction of Western Europe’s devastated economies. Even if China cannot implement its entire plan, OBOR will have a significant and lasting impact.

OBOR is not the only challenge China has mounted against an ageing Western-dominated international order. It has also spearheaded the creation of the Asian Infrastructure Investment Bank, and turned to China’s advantage the two institutions associated with the Brazil-Russia-India-China-South Africa grouping of emerging economies (the Shanghai-based New Development Bank and the $100 billion Contingent Reserve Arrangement). At the same time, it has asserted Chinese territorial claims in the South China Sea more aggressively, while seeking to project Chinese power in the western Pacific.

Institutions are facing threats because of the following reasons –

  • The emergence of China as the 2nd largest economy and increasing China’s influence in Asia by Constructing AIIB and ADB is threatening for IMF and world Bank.
  • New American Policy after the Trump administration also worrisome for many institutions, today America policy is to convert Bipolar to the Unipolar world. The result is the USA withdraw from Trans-Pacific Partnership and also chaos among the NATO member regarding future.
  • New American Unipolar policy is giving chance to China to grow as an economic power and BRI is an example of the China influence, an emergence of China as economy power also threaten for US biased institutions.

BRI is a very ambitious project with this project China wants to control over Asian Economy by connecting China with Eurasia via land and maritime but still, India, Japan and USA are not part of BRI project without the participation of these countries it’s very difficult to make BRI as the successful project. BRI are purely China’s project it cannot be compared with IMF or world bank although these institutions serve the interest of Western world also respect territorial Integrity and sovereignty of other countries and work purely as an economic forum. China’s OBOR project in other countries for Economy as well as military uses.

 


Topic: Devolution of powers and finances up to local levels and challenges therein

3) How will GST impact state revenues? Examine. (200 Words)

Livemint

Introduction :- Goods and Services Tax (GST) is an indirect tax throughout India to replace taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and Twenty Second Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. The GST is governed by GST Council and its Chairman is Union Finance Minister of India – Arun Jaitley. Under GST, goods and services will be taxed at the following rates, 0%, 5%, 12%, 18%, 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. There will be additional cess on sin goods like cigarettes.

GST is expected to be applicable from 1 July 2017

Features of GST

  • Single tax on supply of goods and services, right from the manufacturer to the consumer
  • It is a destination based tax unlike the present taxation scheme which is origin based
  • It is a value based tax as credits of input taxes paid at each stage will be available in the subsequent stages
  • The final consumer will bear only the GST charged by the last dealer in the supply chain
  • At the central level, following taxes are being subsumed under GST
    1. Central Excise Duty
    2. Additional Excise Duty
    3. Service Tax
    4. Countervailing Duty
    5. Special Additional Duty of Customs
  • At the state level, following taxes are being subsumed under GST
    1. State VAT/Sales Tax
    2. Entertainment Tax
    3. Central Sales Tax
    4. Octroi and Entry Tax
    5. Purchase Tax
    6. Luxury Tax
    7. Taxes on lottery, betting and gambling
  • Administration of GST
    • Since there is a federal structure in India, there are two components of GST – Central GST and State GST
    • Both CGST and SGST will be simultaneously levied across the value chain, both on goods and services
    • The tax will not be levied on exempted goods (alcohol, petroleum and its products) and those transactions which are below the prescribed threshold limits
    • Input tax credit of CGST will be available for discharging liablity on CGST itself. Similarly for SGST. Thus no cross utilization of credit would be permitted except in case of IGST
    • IGST would come into picture when there is an inter state transfer of goods and services (u/a 269A(1)). IGST rate would be roughly equal to the sum of CGST and SGST. Following diagram explains the working of IGST
    • For implementation of GST in the country, Central and State governments have registered Goods and Services Tax Network (GSTN) which is a not for profit, non government company to provide shared IT infrastructure to central and state government, tax payers and other stakeholders. The tax payments and credit will be done through an online network.
    • Taxation on Imports – CVD and SAD on imports to be subsumed under GST. The states where goods are imported will gain their share from the IGST paid on imported goods

Impact on Revenue :-

  • The government expects its tax buoyancy to increase after the goods and services tax (GST) is rolled out 
  • The some states in India especially ruled by the opposition parties have been resisting the implementation of GST on the grounds of contentious issues discussed earlier. The foremost of that was about the financial independence of the states about their constitutionally independent revenue sources.
  • If there is only federal level GST then the states will be financially dependent on the federal government as they will have to look for transfers of their own constitutionally allowed revenue. Richer states also fear that the federal government can transfer their own rightful revenue to poorer states in the name of equitable distribution.
  • With the dual system of GST the states will be levying their own GST apart from the central GST and that revenue will be deposited directly to their own treasury. So the required independence of the states in the federal structure will be maintained. States will have much broader tax base under the GST regime.
  • The federal government is empowered to tax services and goods up to the production stage while state governments are empowered for levying sales tax on the goods sold in its territory. All the imported goods also charged with custom duty by the federal government while state charges sales tax on them.
  • With GST states will be able to tax not only the goods but the services as well as imports. For this the federal government has planned to do the constitutional amendment to allow the states to have power to levy the VAT on services as well as allow the federal government to levy tax on the sales. This amendment is also supposed to allow the states to levy tax on imports. The broader tax base will be a major plus for states.
  • In Canada GST the objectives of the states were to broaden the tax base, lower tax rates and remove bias against exports. GST as mentioned earlier is VAT on goods and services. The VAT under GST will not only be about the value addition in goods till the production but it will cover all the services required to take the good to the consumer.
  • So the tax base will be much higher under VAT even if the pure service sector is accounted for separately. This will make the tax more progressive and will also improve the adequacy. The Centre and the States would have concurrent jurisdiction over the entire value chain and over all the taxpayers on the basis of common tax base for goods and services. The taxpayers will have to file returns both with the States and the Centre. Due to this there will be good improvement in the tax compliance. This will improve the revenue of the states.
  • It is proposed that GST will have common registration throughout the country and also it will be linked with the income tax numbers, so the cross verification of tax compliance can be possible. This will also help in the better tax compliance. GST will be a simpler structure and will subsume a number of indirect taxes. This will be much easier to administer and possibly with much less resources and manpower.
  • So the efficiency of tax recovery will improve. With less level of paperwork for the taxpayers and only one type of tax return, the industry, service sector and trading sector will be happy and will flourish.

 


General Studies – 3


Topic:   Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

4) “The best way to turn the failing national airline into a great global airline is to cut it loose from the clutches of the government and privatise it.” Do you agree? Substantiate. (200 Words)

Livemint

Introduction :- India’s government is moving towards privatising the country’s beleaguered national airline, which has floundered amid stiff competition from no-frills rivals and reported at least seven years of losses. In 1970s, The British Airline which was national airline then was in similar crisis that Indian Airways facing today. Under the new right movement of the privatization by Thatcher, It got nationalized and today it considered as the one of the most trustable global airline. Following aspect suggest that Government of India should privatize Air India :-

  • Air Indian operate under debt of the Rs.50,000 crore. Privatization of airline will to the drain of wealth form Indian exchequer that the Government can invest it for the social security of the poor people.
  • Nationalize giant always deter the private sector participation in that sector. The reason is simple that no private entity can afford to operate in non viable route that air India can and this occupy the space for new player to grow. Thus, Privatization of air India will introduce new player in Indian aviation which will increase competition and in long term, Indian will get quality air travel on affordable price.
  • Unlike Railways, Airways have not any social service mandate as airways mainly use by the upper section of society. In addition, Airlines also not use for the Freight transport of fertilizer and coal that Indian railways did under social obligation.

Conclusion :- Air India should be privatised only after restoring it to some degree of health so as to realise value and enable it to compete with others. The Government should not interfere in the management of the airline. Perhaps the best option would be to hand over the company for management alone at this stage, with financial support being linked to the achievement of milestones. The option to partake in the equity of Air India could be a carrot at the end of an agreed period.

 

Case Studies :-

Privatizing national airlines sounds like a logical step, but many privatizations end in failure, giving governments reason to hesitate. But there are also successes, for example Kenya Airways, which was privatized over 20 years ago, and Samoa’s Polynesian Blue. Both airlines have been profitable for years and contributed to growth in their respective tourism sectors.

What are some of the key success factors in a successful airline privatization? Handshake stresses that a major precondition is having a strong champion in government and a genuine wish for reform. It helps to get the tourist industry on board—more competition means lower prices and more tourists. Finding the right private sector partner is also critical—in addition to investment funds, you need a seasoned player with access to global networks and a low cost base. Getting the right partner on board will involve complex negotiations.

A good transaction advisor can guide governments through tricky privatization and reform processes and rescue poorly-performing national airlines. A shame, then, that Ghana Airways didn’t have one.

 


Topic: Economics of animal rearing

5) Critically comment on the Centre’s move to notify new rules to regulate livestock markets under the Prevention of Cruelty to Animals Act, 1960 (PCA). (200 Words)

The Hindu

Introduction :- The Centre’s move to notify new rules to regulate livestock markets under the Prevention of Cruelty to Animals Act, 1960 (PCA) is either extremely poorly thought out or much too clever for its own good.

The Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules of 2017 permit the sale of cattle in markets only to verified “agriculturists”, who have to give an undertaking to the authorities that cattle will not be sold or slaughtered for meat. Nor shall the animal be used for sacrifices. The animal will be used only for farming.

Critical analysis:-

  • The rules take away the rights of the owner to even sell the carcass of an animal dying of “natural causes” in the market. The rules prescribe that the carcass will be incinerated and not be sold or flayed for leather.
  • On the surface, the notification, which spans eight pages, reads like a general document on the regulation of the sale of all kinds of livestock bought and sold in animal markets, with some welcome prohibitions on the cruelty inflicted in the transport and treatment of animals. But parse the rules, and it is evident that cattle — a category that includes cows, buffaloes, bulls and camels — come under a slew of special restrictions which, when effected, could have an extremely serious impact on the meat and livestock industry, not to mention the livelihoods and dietary choices of millions of people. 
  • On the surface, the notification, which spans eight pages, reads like a general document on the regulation of the sale of all kinds of livestock bought and sold in animal markets, with some welcome prohibitions on the cruelty inflicted in the transport and treatment of animals. But parse the rules, and it is evident that cattle — a category that includes cows, buffaloes, bulls and camels — come under a slew of special restrictions which, when effected, could have an extremely serious impact on the meat and livestock industry, not to mention the livelihoods and dietary choices of millions of people. 
  • What the Act prohibits is only the “infliction of unnecessary pain and suffering” when animals are consumed as food. Such legal infirmities are bound to be challenged in court, but meanwhile the economic costs of this decision will merit a close watch

Conclusion :- The restriction on trade of cattle or carcasses in livestock markets will have to be tested on the touchstone of the fundamental right to occupation, trade or business under Article 19 (1) (g) to see whether it is “reasonable.” Though Section 38 of the 1960 Act confers the Centre the power to make rules, several judicial precedents hold that this rule-making power does not allow going “beyond the scope of enabling Act or which is inconsistent therewith or repugnant.” Rules cannot be used to bring within its purview a subject — in this case, restriction on sale of cattle for slaughter or animal sacrifices —that has been specifically excluded by the statute. The Centre must address the concerns of the trade as well as of those who suspect the notification is a part of a Machiavellian plot to influence and curb food choices. While there is a case to retain most of the rules prohibiting the cruel treatment of animals, the ban on the sale of cattle for slaughter in animal markets must go.