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General Studies – 1
Topic: Distribution of key natural resources across the world (including South Asia and the Indian sub-continent);
Reference: NCERT CLASS – XII: India People and Economy.
Why the question:
The question is part of the static syllabus of General studies paper – 1.
Key Demand of the question: To
Explain the distribution of major non-metallic minerals in India and to analyze the National Mineral policy, 2019.
Directive:
Critically analyze –
When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.
Structure of the answer:
Introduction:
Start by mentioning about non-metallic minerals in India and their importance.
Body:
In the first part of the body, with a neat illustrative map, highlight the distribution of major non-metallic minerals such as Mica, Limestone, Dolomite, Asbestos, Magnesite, Gypsum and Kyanite etc.
In the second part, mention about the latest National Mineral Policy, 2019 and its aims in fueling growth, improve India’s minerals sector that can catalyse sustained economic growth, achieve mineral security and growth would have also ensured a globally competitive investment regime along with sustainable development of mining sector.
The NMP talks of increasing mineral production by 200 per cent in seven years. It’s a very ambitious target. It also talks of reducing the trade deficit in mineral sector by 50 per cent in seven years. Bring out the positives of the policy such as business-friendliness of the policy, ease of doing businesses’ and attracting investments, Creating exclusive mining zones and simplifying clearances,
Next mention about, how India’s mining sector has grappled with multiple challenges including illegal and unscientific mining, environmental and statutory process violations, increased cases of fatalities in mine sites and lack of investments in the sector. Mining curbs in Goa and Karnataka along with mine closures in top producing states, Odisha and Jharkhand have led to reduced employment opportunities for the mineral sector professionals and associated contract personnel; as a result, hundreds of young geology and mining graduates face a bleak future.
Conclusion:
Conclude with a way forward.
Introduction:
Non-metals are minerals (Non-metallic minerals) which, as a rule, do not serve as raw material for the extraction of metal. The group of non-metals, which is widespread amongst the variety of minerals, is of great economic significance.
Body:
Mica
- Mica is a naturally occurring non-metallic mineral that is based on a collection of silicates.
- Mica is a very good insulator that has a wide range of applications in electrical and electronics industry.
- It is used in toothpaste and cosmetics because of its glittery appearance. It also acts as a mild abrasive in toothpaste.
- India is one of the foremost suppliers of mica to the world. Mica-bearing igneous rocks occur in AP, Bihar, Jharkhand, Maharashtra, Rajasthan.
Mica Reserves in India
- Andhra Pradesh (41 per cent)
- Rajasthan (21 per cent)
- Odisha (20 per cent)
- Maharashtra (15 per cent)
- Bihar (2 per cent)
- Jharkhand (Less than 1 per cent)
Limestone
- Limestone rocks are composed of either calcium carbonate, the double carbonate of calcium and magnesium, or mixture of both.
- Limestone deposits are of sedimentary origin and exist in all the geological sequences from Pre-Cambrian to Recent except in Gondwana.
- 75 per cent Limestone is used in cement industry, 16 per cent in iron and steel industry [It acts as flux] and 4 per cent in the chemical industries.
- Rest of the limestone is used in paper, sugar, fertilizers, etc.
- Over three-fourths of the total limestone of India is produced by Madhya Pradesh, Rajasthan, Andhra Pradesh, Gujarat, Chhattisgarh and Tamil Nadu.
Asbestos
- Asbestos has great commercial value due to its fibrous structure, filaments of high tensile strength and its great resistance to fire.
- Asbestos cement products like sheets, pipes and tiles are used for building purposes.
- Two states of Rajasthan and Andhra Pradesh produce almost the whole of asbestos of India.
Magnesite
- It is primarily used for manufacturing refractory bricks.
- It is also used as a bond in abrasives, manufacture of special type of cement for artificial stone, tiles and for extraction of the metal magnesium.
- Major deposits of magnesite are found in Uttaranchal, Tamil Nadu and Rajasthan.
- Tamil Nadu is the largest producer [three-fourth] of magnesite in India.
- Tamil Nadu has one of the largest deposits of magnesite in the world and the largest in India are found at Chalk Hills near Salem town.
Salt
- Salt is obtained from sea water, brine springs [salt water springs], wells and salt pans in lakes and from rocks.
- Rock salt is taken out in Mandi district of Himachal Pradesh and in Gujarat. It is less than 1 per cent of the total salt produced in India.
- Sambhar Lake in Rajasthan produces about 10 per cent of our annual production.
- Sea brine is the source of salt in Gujarat, Maharashtra and Tamil Nadu.
- Gujarat coast produces nearly half of our salt.
National Mineral Policy:
- Proposes to increase the production of major minerals by 200 per cent in seven years and reduce trade deficit in mineral sector by 50 per cent in seven years.
- Aims to attract private investment through incentives like financial package, right of first refusal at the time of auction.
- Introduces the concept of ‘Exclusive Mining Zones’.
- Proposes to identify critically fragile ecosystems.
- Encourages merger and acquisition of mining entities and transfer of mining leases.
- Proposes harmonising royalty and all other levies and taxes.
- Emphasises on ensuring welfare of mining-affected people / communities and ensuring rehabilitation and resettlement.
- Introduces the concept of ‘Inter- Generational Equity’ in mineral resource exploitation
Significance of NMP, 2019
- The concept of ‘Inter-Generational Equity’ that deals with the well-being not only of the present generation but also of the generations to come promotes sustainable development.
- Focus on ‘Make in India’ initiative and gender sensitivity in terms of the vision
- In so far as the regulation in minerals is concerned, e-Governance, IT enabled systems have been incorporated.
- NMP, 2019 aims to attract private investment through incentives while the efforts would be made to maintain a database of mineral resources.
- The new policy focusses on use coastal waterways and inland shipping for evacuation and transportation of minerals and encourages dedicated mineral corridors to facilitate the transportation of minerals.
- The utilization of the district mineral fund for equitable development of project affected persons and areas.
- NMP, 2019 proposes a long term export import policy for the mineral sector to provide stability and as an incentive for investing in large scale commercial mining activity.
Challenges:
- The proposal of ‘Exclusive Mining Zones’ arise serious concerns about the impact of this proposal on forest ecology, wildlife corridors and forest-dependent communities.
- Clearance process is not yet robust and comprehensive to improve the quality of assessment before projects are cleared.
- Post-clearance monitoring has not been strengthened. The clearance mechanism continues to suffer from a fragmented approach. The process has largely become a bureaucratic paperwork, with little focus on protecting environment and community.
- Air, water and soil pollution problems in almost all key mining districts of India have severely affected people’s health and their livelihood.
- The Policy also falls short in providing necessary guidance to ensure effective mine closure practices. A key impediment for proper mine closure in India is that the current financial assurance for this is insufficient.
Conclusion:
Mineral resources of a country and the extent of its utilization are important determinants of growth and prosperity of a nation and its people. Though the actual value of mineral production accounts for only a small percentage of the Gross Domestic Product (GDP) of a country, it plays a vital role in world economy, as it has a direct bearing to the industrial growth and developments in the frontiers of science and technology.
Success of this national mineral policy will be critical in propelling India on to a loftier development trajectory. Successful implementation of this policy and shall be ensured by achieving a national consensus among various key stakeholders and their commitments to fulfil its underlying principles and objectives.
Topic: factors responsible for the location of primary, secondary, and tertiary sector industries in various parts of the world (including India).
Reference: NCERT CLASS – XII: India People and Economy.
Why the question:
The question is part of the static syllabus of General studies paper – 1.
Key Demand of the question:
To bring out the reasons for agglomeration by industries and firms.
Directive:
Elaborate – Give a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
Begin the answer by defining agglomeration industries. Cite few examples of Agglomeration Industries in India such as Diamond Agglomeration of Surat, Transportation Industry of Namakkal etc.
Body:
In the first part of the body, elaborate upon Agglomeration industries as drivers of economic growth. From improved access to market centers to from enhanced intra-industry linkages and inter-industry urbanization economies, which all enhances productivity.
In the next part of the body, bring out in detail, the factors responsible for agglomeration of Industries such as Proximity to Customers and Suppliers, Labor Market Pooling, Intellectual or Technology Spillovers, Natural Advantages, facilities for the development, local trade of specialized inputs and better availability of public intermediate inputs tailored to the technical needs of the industry. Substantiate these with examples from India and across the world.
Conclusion:
Summarize the overall importance of agglomeration industries, especially in their role in urbanization and conclude the answer.
Introduction:
Industries based on cheap, bulky and weight-losing material (ores) are located close to the sources of raw material such as steel, sugar, and cement industries. Many industries benefit from nearness to a leader-industry and other industries. These benefits are termed as agglomeration economies.
Body:
Agglomeration Economies as factors of Economic Growth:
Agglomeration economies or external economies of scale refer to the benefits from concentrating output and housing in particular areas.
If an area specialises in the production of a certain type of good, all firms can benefit from various factors such as:
- Good supply networks
- Supply of trained workers
- Infrastructure built specifically for the industry
- Good transport links.
Due to agglomeration economies, people and firms often concentrate in particular areas. For example, people tend to move to cities where is there is a greater choice of jobs, social activities and specialist services
Examples of Agglomeration Economies:
Silicon Valley. IT setups tend to cluster in similar regions, such as Silicon Valley California, and major cities, like London. The reason is that these areas attract highly skilled IT personnel and it is easier to recruit the right staff. Also, the support infrastructure will surround the areas. There will be a competitive market for designers, software engineers, and proof readers.
Chinese clothing manufacturers. China has seen a strong growth in manufacturing industries on the south-east coast. These areas have good transport links for exporting to the rest of the world. Also, the areas have attracted migrant flows from northern China, enabling wage costs to remain low
Factors responsible for the agglomeration of manufacturing industries in India:
- The most dominant factor of industrial location is the least cost.
- Cost of obtaining raw materials at site: Manufacturing activity tends to locate at the most appropriate place where all the raw materials of production are either available or can be arranged at lower cost.
- Cost of production at site: These are influenced by availability of labour, capital, power, etc. Thus industrial location is influenced by the costs of availability of these factors of production.
- Cost of distribution of production: The distance of industry from market influence the transportation costs. Transportation costs influence the cost of distribution of production.
- Raw materials:
- Indeed, the location of industrial enterprises is sometimes determined simply by location of the raw materials.
- Finished product of one industry may well be the raw material of another. For example, pig iron, produced by smelting industry, serves as the raw material for steel making industry.
- Power:
- Regular supply of power is a pre-requisite for the localisation of industries. Coal, mineral oil and hydroelectricity are the three important conventional sources of power.
- The iron and steel industry which mainly depends on large quantities of coking coal as source of power are frequently tied to coal fields.
- Transport:
- Transport by land or water is necessary for the assembly of raw materials and for the marketing of the finished products.
- The development of railways in India, connecting the port towns with hinterland determined the location of many industries around Kolkata, Mumbai and Chennai.
- Market:
- The entire process of manufacturing is useless until the finished goods reach the market. Nearness to market is essential for quick disposal of manufactured goods.
- It helps in reducing the transport cost and enables the consumer to get
- Things at cheaper rates.
- Water:
- Water is another important requirement for industries. Many industries are established near rivers, canals and lakes, because of this reason.
- Iron and steel industry, textile industries and chemical industries require large quantities of water, for their proper functioning.
- Site:
- Site requirements for industrial development are of considerable significance. Sites, generally, should be flat and well served by adequate transport facilities.
- Climate:
- Climate plays an important role in the establishment of industries at a place.
- Harsh climate is not much suitable for the establishment of industries. There can be no industrial development in extremely hot, humid, dry or cold climate.
- Capital:
- Modern industries are capital-intensive and require huge investments. Capitalists are available in urban centres.
- Big cities like Mumbai, Kolkata, Delhi, and Chennai are big industrial centres, because the big capitalists live in these cities.
Additional capacities are being planned to be installed in all the major manufacturing units.
- Government Policy:
- Government activity in planning the future distribution of industries, for reducing regional disparities, elimination of pollution of air and water and for avoiding their heavy clustering in big cities, has become no less an important locational factor.
- A public procurement policy has been proposed incorporating technology along with common facility centres while the Khadi Mark steps has been launched to promote Micro Small and Medium Enterprises.
- Banking Facilities:
- Establishment of industries involves daily exchange of crores of rupees which is possible through banking facilities only. So the areas with better banking facilities are better suited to the establishment of industries.
- Insurance:
- There is a constant fear of damage to machine and man in industries for which insurance facilities are badly needed.
Conclusion:
Policies in the form of taxation concession, stable policy, cheaper land, administrative ease and good governance facilitates the development of Industrial clusters. In pursuance to this GOI passed the Special Economic Zones Act, in 2005. Further Government has established National Investment and Manufacturing Zones for increasing the manufacturing share in country’s GDP from 16 percent to 25 percent by 2022.
Governments adopt ‘regional policies’ to promote ‘balanced’ economic development and hence set up industries in particular areas.
General Studies – 2
Topic: Salient features of the Representation of People’s Act.
Reference: The Hindu
Why the question:
Overlapping with the pandemic, elections have been held across the globe. From the United States to South Korea, straddling India, they have brought massive numbers of people out to vote.
Key Demand of the question:
To explain the importance of conducting elections even in the time of a pandemic.
Directive:
Elaborate –
Give a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
Start by giving context how citizens across the world have braved the pandemic and came to vote in elections held in U.S.A, South Korea and India etc.
Body:
Firstly, highlight the need to hold free and fair elections.
Second, bring about how countries across the world adopted safety measures and some novel measures so that voting in elections could be continued uninterrupted. Appreciate the efforts of election commission of India on successfully and safely conducting Bihar elections.
Third, write about how postponing the elections because of the pandemic would regressive democratically.
Finally, suggest measures to how India and the world should brace up to conduct free, fair and safe elections in 2021 as mass vaccination may still take time.
Conclusion:
Complete the answer by highlight how the situation is set to continue and new risks maybe emerging due to mutations but with adequate precautions and safety measure, the exercise to uphold democracy must go on.
Introduction:
Elections are the most integral and important part of politics in a democratic system of governance. True democracy can function only when elections to the offices of power are held in a free and fair manner.
Body:
‘Free’ means that all those entitled to vote have the right to be registered and to vote and must be free to make their choice. In South Africa every citizen over the age of 18 is entitled to vote. An election is considered ‘free’ when you can decide whether or not to vote and vote freely for the candidate or party of your choice without fear or intimidation. A ‘free’ election is also one where you are confident that who you vote for remains your secret.
‘Fair’ means that all registered political parties have an equal right to contest the elections, campaign for voter support and hold meetings and rallies. This gives them a fair chance to convince voters to vote for them. A fair election is also one in which all voters have an equal opportunity to register, where all votes are counted, and where the announced results reflect the actual vote totals.
Challenges posed by the COVID-19
- Elections in India are colossal endeavour involving a large number of people – voters, polling officials, political party members and security personnel.
- Possibility of the lack of strict implementation of the preventive measures set forth by the EC, it creates a huge risk of an increase in COVID-19 cases.
- The EC’s plan to expand postal ballot to newer categories is shadowed by controversy, with political parties calling it unconstitutional and arguing that it would enable the ruling side to influence voters.
- The lack of concrete decision by the EC on digital campaigning leads to the possibility of worsening digital divide within the country as it is resource-intensive, the one that needs best minds to understand the data to target voters’ consciousness.
- The political parties’ inability to understand the ground situation due to the movement limitations and lack of digital accessibility in various parts of the country reduces the voice of minorities living in remote areas.
- There is the challenge of political parties using their affiliations to private media to float biased news without any inhibition because of the EC’s inability to monitor online space.
- Poor voter turnoutdue to the fear of being infected.
- This is addressed by extending postal ballots for vulnerable communities and making use of Systematic Voter Education for Electoral Participation (SVEEP) programme and technologies for creating awareness among voters.
- Apart from these challenges, there also exists the financial aspect of the elections.
- Every electoral management body in the world is financially challenged, which would further be exacerbated by the additional responsibilities of health safety.
What did India learn from other countries?
Approximately 34 countries have conducted national assembly or presidential elections despite the pandemic. The most successful among them are South Korea and Sri Lnaka. India’s Election Commission borrowed some of the policies and ideas followed by these countries.
South Korea
- The country recorded the highest voter turnout of 66.2% in 28 years.
- Precautionary measures were taken to prevent the spread of the infection.
- It disinfected polling centres, mandated social distancing norms and other precautionary measures.
- It did not ignore the interests of coronavirus positive voters and self-quarantined voters. While the former were allowed to mail their ballots, the latter was allowed to vote after 6 PM.
Sri Lanka
- In a bid to prevent the elections from becoming a public health hazard, Sri Lanka’s Election Commission initially held mock elections.
- The government issued health guidelines, which included limiting the number of people engaged in door-to-door campaigning to 5.
- Party meetings’ attendees were limited to 300 or 500 (in case a party leader attended).
- Social distancing and other protective measures were ensured for the participants.
- The country’s EC, though wary of the pandemic escalating, did not extend the provision of postal votingto those vulnerable to COVID-19 infection. It limited the postal voting to public officials assigned to electoral duty.
- This is in contrast to the practice amongst several countries that are holding elections during the pandemic.
- Apart from crowd control measures in the voting centre, the EC faced the issue of virtual campaigning and the absence of campaign finance laws.
Conclusion:
The COVID-19 outbreak has turned into a test for the election commission’s motto of ‘No Voter Left Behind’. The Bihar election could be the opportunity to prove its efficiency in safeguarding the democracy of highly diverse country as was done during the beginning of the Indian independence while also ensuring the health safety of the all people involved in the election process.
General Studies – 3
Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Reference: Live Mint
Why the question:
According to a report, social commerce in India is set to touch $16-20 billion in GMV by 2025. This article captures its potential.
Key Demand of the question:
To bring the out the opportunities and challenges in social commerce in the Indian scenario.
Directive:
Assess – When you are asked to assess, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidences. You have to appraise the worth of the statement in question. There is scope for forming a personal opinion here.
Structure of the answer:
Introduction:
Define social commerce and briefly mention its features. Put forward the increasing trends towards social commerce with a few examples of social commerce.
Body:
In the first part, mention the increasing scope for social commerce in India. Social commerce is a growing and changing field of online marketing which works in conjunction with social media and the growth in online shopping. The enabling of social commerce by platforms like Facebook, WhatsApp and Instagram etc, the increasing digital connectivity, helping to democratize online commerce, provision of trust and wide reach of social commerce channels etc.
In the next part, bring out the challenges faced in social commerce. Competition from social media giants, lack of branding, lack of on ground insights, pricing of goods and lack of awareness in public.
Conclusion:
Conclude with a way forward to minimize challenges and harness the full potential of social commerce in India.
Introduction:
Social commerce is a subset of electronic commerce that involves social media, online media that supports social interaction, and user contributions to assist online buying and selling of products and services. A recent report by Bain & Company and Sequoia India quantified the market opportunity. Social commerce, where consumers use a host of social networking platforms (Facebook, Instagram) and reselling apps (Meesho, GlowRoad) to buy and sell products, is expected to touch $16-20 billion in gross merchandise value (GMV) in the next five years. In 10 years, it projected social commerce to become two times the size of the current e-commerce market estimated at $30 billion GMV
Body:
- Various Models for S-Commerce:
- Social commerce has several models, one being video commerce, which includes one to many interactions by brands/influencers via live streams/pre-recorded videos.
- Video commerce is used by Indian startups such as BulBul and SimSim.
- Social commerce can also mean commerce that is facilitated by social networking platforms such as Facebook and Instagram, which are increasingly being used by buyers and sellers.
- Both platforms have also come up with features – Facebook Marketplace, Instagram Business – to enable online commerce for buyers and sellers.
- Besides these, social reselling, such as the model being used by Meesho, GlowRoad and Shop101, conversation or chat-led commerce and group buying, as being enabled by DealShare and Mall91, are also popular modes of social commerce.
- India is witnessing the rise of many more social commerce startups and KIKO TV is another one that recently pivoted from being a short-format video-sharing app to a commerce platform.
- Why India has potential?
- 2nd Highest Internet Users
- Social commerce’s potential is underscored by the fact that even with 41% internet penetration, behind China (60%), the USA (89%), Brazil (71%) and Indonesia (46%), India has 572 Mn internet users, second only to China which has 854 Mn internet users.
- 3rd Highest Online Shoppers
- Similarly, even with just 8% of Indians shopping online, India has 105 Mn online shoppers, ranking third after China (637 Mn with 45% of its population shopping online) and the USA (205 Mn with 62% of its population shopping online).
- 2nd Highest Internet Users
-
- Opportunities:
- According to the report, new social commerce platforms such as those mentioned above, Meesho, DealShare, Bulbul and others, had a GMV between $500-$700 Mn in FY20.
- Of these, Meesho-like reseller platforms accounted for $400-$500 Mn, while other social commerce platforms, such as those utilising video commerce and group buying, accounted for $100-200 Mn.
- Meanwhile, social networking giants such as Facebook and Instagram had a GMV of $1,200-$1,300 Mn for social commerce through these platforms in India.
- The young software developer founded a startup and launched an app, Bikayi, to help sellers like him increase their business
- Barely one-and-a-half years old, Bikayi suffered a brief pause in the initial days of the lockdown but has been growing 100% thereafter, onboarding a range of merchants from electronics retailers to apparel makers to grocery stores, mostly from tier-3 and tier-4 towns.
- As a WhatsApp integrated commerce platform, Bikayi facilitates sellers in creating their online stores and even helps them manage their businesses.
- A recent report by Bain & Company and Sequoia India quantified the market opportunity also cited a consumer survey where the respondents said they consider WhatsApp, followed by Facebook and Instagram, as the most preferred platforms for commerce.
- According to the report, social commerce has the potential to empower more than 40 million small entrepreneurs across India.
- However, internet business experts do not feel that social commerce will remain restricted or confined to the US social media major.
- Social commerce channels provide trust and reach and have been able to scale at lower customer acquisition cost.
- It also helps democratize online commerce and connect brands and consumers through social media platforms that are increasingly gaining significance as businesses make the shift from offline to online.
- The time spent on and the growth of social media make a case for the emergence of newer platforms.
- Social commerce firms are uniquely positioned to overcome barriers of trust, offering personalized touch and convenience, elements critical for businesses looking to grow in tier-2 cities and beyond
- Bikayi reported that between July and October 2020, 53% of sales on the platform came from tier-2 and tier-3 towns such as Guwahati, Surat, Bahraich and Dhenkanal, indicating a preference for buying products over WhatsApp from local merchants in small-town India.
- Challenges
- Startups will face stiff competition from large global social media platforms.
- The big players are already identified and strongly positioned as free, social and “timepass” brands. “This brand extension won’t work.
- Startups with a vision as an e-commerce platform and an innovative tech-piece, supported by accurate content and go-to-market strategy, will win the game nationally and hopefully worldwide
- WhatsApp and Facebook may be betting big on social commerce, but will need support from local startups with their deep on-ground insights on customer behaviour to penetrate India’s local markets.
- Meanwhile, in the fiscal year 2018-19 (FY19), Meesho had reported a 19X year-on-year (YoY) increase in its losses, thus exposing some of the chinks in the revenue model for the social commerce startups in India.
- The losses were attributed to staff salaries, logistics, marketing and reseller bonus programs, discounts, rewards, referrals and other reimbursements.
- Meesho had also increased its revenue to INR 84 Cr from INR 5 Cr in the previous year.
- Opportunities:
Conclusion:
Social commerce is inherently focused on solving the trust issues of the next wave of online shoppers- as reflected in its high share of Tier II-plus city consumers. Significant chunk of India’s over 250 million online shoppers of 2022 and beyond will be very comfortable with social commerce and this model will play a key role in extending e-commerce to the masses. Our customers (sellers) need nurturing, support and understanding and not just the do-it-yourself model of the bigger players
Topic: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.
Reference: Business Standard , The Hindu
Why the question:
India has been ordered to return up to $1.4 billion to Cairn Energy PLC of the U.K. after an international arbitration overturned tax demanded retrospectively.
Key Demand of the question:
Put forward arguments against retrospective taxation in India which has done more harm than good.
Directive:
Comment– here we have to express our knowledge and understanding of the issue and form an overall opinion thereupon.
Structure of the answer:
Introduction:
Start by defining what constitutes a retrospective tax and its genesis in India.
Body:
Mention about the need for retrospective taxation in India. Talk about the Vodafone and the Cairns case.
Highlight with examples as to how the retrospective taxation has been more damaging than it has helped. Vicious cycle of arbitration and appeals which are ultimately lost, disincentive investor sentiment, a PR failure, fear of Indian tax regime and using retrospective tax as a tool to meet revenue targets.
Put forward the opportunities that arise by moving away from retro tax such as formation of a coherent investment strategy, boosted investor confidence, ease of doing business and harmonious bilateral investment treaties etc.
Conclusion:
Underscore the need of India to respect the decision of arbitrators and not to resort to appeals and move towards actually achieving ‘vivad se vishwas’.
Introduction:
Retrospective tax means creating an additional charge or levy of tax by way of an amendment from specified date in the past. India has been ordered to return up to $1.4 billion to Cairn Energy PLC of the U.K. after an international arbitration overturned tax demanded retrospectively. Recently, The Permanent Court of Arbitration ruled that India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on Vodafone for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
Body:
- Retrospective taxation:
- As the name suggests, retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed
- Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.
- Global Norm: Apart from India, many countries including the US, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies, which had taken the benefit of loopholes in the previous law.
- Need of Retrospective Taxation:
- Vodafone case – CGP Investments (Holdings) Limited is a Cayman Islands-registered company, which owned the Indian assets of Hutchison Essar.
- Vodafone International Holdings B.V., a Dutch company, acquired 67% of an Indian company, Hutchinson Essar Limited, by buying 100% stake in CGP.
- Cairn case – The assets held by Cairn India Holdings had to be transferred to a company registered in India, which was done by Cairn India (an Indian entity) buying the entire stake in Cairn India Holdings from Cairn U.K. Holdings.
- Both the cases involve a transfer of ownership of an Indian entity by way of an overseas transaction involving parties which did not fall under Indian tax jurisdiction.
- In both cases, the tax authorities argued that though the deal was between two overseas entities, the shares derived their value from assets held in India, and hence were liable for capital gains tax.
- The Supreme Court struck down the demand in the Vodafone case.
- The government then retrospectively amended the law to allow indirect transfers which derive substantial value from assets located in India to be subjected to tax.
- Problems:
- The amendment was used to nullify a judgment of the Supreme Court and undermines the Court’s authority.
- The issue is not just that the tax authorities are persisting with their efforts to collect the money.
- The issue is why the retrospective amendment is being allowed to continue in the statute books.
- It is against the government’s determination to root out “tax terrorism”, and undermines ‘Make in India’ initiative.
- Changing the rules, after having started doing business discourages business environment and potential investments.
- Consequence of Retrospective Taxation on Market
- Hurts Companies: While governments often use a retrospective amendment to taxation laws to “clarify” existing laws, it ends up hurting companies that had knowingly or unknowingly interpreted the tax rules differently.
- Hurts Investor Confidence: The amendment was criticised by investors globally, who said the change in law was “perverse” in nature. This impacted the market sentiment and the flow of foreign funds to India.
- Implication of the ruling
- Policy Setback: The ruling in favor of Vodafone and Cairn U.K. Holdings signals a setback for the country’s retrospective taxation policies.
- Sets a precedence: The ruling also raises the possibility of other cases under arbitration being decided on similar lines.
- Way Forward:
- The Shome Panel had recommended that any taxation involving indirect transfer of assets located in India should be prospective and not retrospective.
- The Committee concluded that retrospective application of tax law should occur in exceptional or rarest of rare cases, and with particular objectives.
- Retrospective application of a tax law should occur only after exhaustive and transparent consultations with stakeholders who would be affected.
General Studies – 4
Topic: laws, rules, regulations and conscience as sources of ethical guidance;
Reference: Ethics, Integrity and Aptitude by Lexicon Publications.
Why the question:
The question is part of the static syllabus of General studies paper – 4.
Key Demand of the question:
To debate as to what should prevail if morality is in conflict with the law.
Structure of the answer:
Introduction:
Start the answer by mentioning the relationship between morality and law.
Body:
Explain that the popular conception of the connection between law and morality is that in some way the law exists to promote morality, to preserve those conditions which make the moral life possible.
Write about the reason for conflict. They conflict most often because morality gives you a sense of what is right and wrong or acceptable and what is not according to human nature. Law commands obedience not out of a sense of right or wrong but out of necessity. Substantiate the above with examples.
Conclusion:
Conclude by underscoring that Morality forms the foundation, the pre-condition, for laws. Put another way, laws do not have the necessary foundation or reason to be, if there is no such thing as morality.
Introduction:
Law is the codification of societal norms and values which helps in delivering justice. While Morality is very those values and norms on which law is framed to decide what is right and wrong. Law and morality are intimately related to each other. Laws are generally based on the moral principles of society. Both regulate the conduct of the individual in society.
Body:
- Relation between law and morality:
- Law is essentially a set of rules and principles created and enforced by the state whereas morals are a set of beliefs, values and principles and behaviour standards which are enforced and created by society.
- Legal and moral rules can be isolated with the former being created by the legislative institution of parliament whereas the latter have evolved with and through society and are the standards which society in general accepts and promotes.
- Some laws mirror the majority of society’s moral view, for example, that murder is wrong but the introduction of same sex marriages is seen by some people as morally wrong and society is divided.
- The existence of unjust laws (such as those enforcing slavery) proves that morality and law are not identical and do not coincide.
- The existence of laws that serve to defend basic values such as laws against murder, rape, malicious defamation of character, fraud, bribery, etc. prove that the two can work together.
- Morality forms the basis of good law and therefore laws are framed to prohibit any immoral act. For example, Laws in India prohibits domestic violence, atrocities on lower castes, child marriages, crimes like murder and rapes because they are immoral.
- Laws govern conduct at least partly through fear of punishment. Morality, when it is internalized governs conduct without compulsion. The virtuous person does the appropriate thing because it is the fine or noble thing to do.
- Morality can influence the law in the sense that it can provide the reason for making whole groups of immoral actions illegal.
- Law can be a public expression of morality which codifies in a public way the basic principles of conduct which a society accepts. In that way it can guide the educators of the next generation by giving them a clear outline of the values society wants taught to its children.
- Obedience to law depends upon the active support of the moral sentiments of the people. Laws which are not supported by the moral conscience of the people are liable to become dead letters.
Conclusion:
The only check against the breach of morality is social condemnation or individual conscience. Moral actions are a matter of choice of inner conscience of the individual; laws are a matter of compulsion. Law cannot be made on each and every aspect of life. More than law behavioral change is the key to a moral society, as rightly said by BR Ambedkar, “No law can protect us if it’s not avowed by the moral conscience of the society at large”.
Topic: Case Study
Why the question:
The question is part of the case studies in static syllabus of General studies paper – 4.
Key Demand of the question:
To analyse, who is better suited for this project by taking both ethical considerations and their efficiency.
Structure of the answer:
Introduction:
Start by giving the context of choosing between an effective but dishonest guy or an honest but ineffective individual.
Bring out the key stakeholders in the above case study and major ethical dilemmas present
Body:
In the body, analyse the case of Mr Rajam, who is highly productive but integrity is questionable. Bring forward both the short term and long term consequences of put Mr Rajam in charge of the Malgudi bridge project.
Then take up the case of Mr Swami, who is known for his honesty but is not efficient and prone to missing deadlines. Bring forward both the short term and long term consequences of put Mr Swami in charge of the Malgudi bridge project.
Conclusion:
Follow this up with ethical reasoning and justify it is always better to choose a person with high standards of morality as efficiency can always be improved by training and monitoring. Integrity on the other hand, cannot be taught so easily.
Introduction:
In the above case being a Chief Project Officer I need to choose between an effective but dishonest guy or an honest but ineffective individual.
Body:
Stakeholders involved are:
Mr. Swami known for his honesty and uprightness in the department but his efficiency is low
Mr. Rajam known for doing high quality work on time and highly efficient worker. But in the past, he had some allegations of corruption and many complained against his nexus with the contractors.
People of Malgudi who are suffering from the inconvenience caused by bridge collapse.
If I appoint Mr. Rajam who is highly productive but integrity is questionable. The bridge may be completed in time. But, the quality of the bridge may be comprised and this may lead to a disaster and may take the lives of the people. Same as the hanging bridge on the river Tungabhadra connecting Hampi to Anegundi in Koppal collapsed on January 22, 2009, killing eight people and injuring 32. Also, the future nexus between the contractor may lead to a dent to the exchequer of the government. Appointing him may solve the short-term cause, but it may lead to long term illness in Malgudi.
So, I will appoint Mr. Swami who is known for his honesty but is not efficient and prone to missing deadlines. Because as the proverb says ‘honesty is the best policy’ will throw light on the importance of honesty and unrighteousness. The efficiency of the person can be improved, but unrighteousness and integrity cannot be taught so easily. Also, the idea of “Purity of means” as propounded by Mahatma Gandhi says that ‘means are as important as end’. The purity of means is to achieve an end result which tells us about values and attitude. His appointment will lead to a quality malgudi bridge which will benefit the future generations of the rural hamlet of malgudi.
Conclusion:
It is always better to choose a person with high standards of morality as efficiency can always be improved by training and monitoring. Integrity on the other hand, cannot be imbibed so easily.
