UPSC Exam: Comprehensive News Analysis - December 22

A. GS1 Related

B. GS2 Related

• Indian criminal law explicitly criminalises acts that deceive a person. However, it is surprising that the criminalisation of an act that breaches the sanctity of a pure social institution such as marriage, by way of deceit and lies, is facing challenges in the past few decades.
• The constitutionality of Section 497 of the Indian Penal Code (IPC) was previously challenged before the Supreme Court in Yusuf Abdul Aziz v. The State of Bombay(1954).
• A constitutional bench held then that Section 497 did not violate the right to equality as enshrined in Articles 14 and 15 of the Constitution.
• Sex is a sound classification and although there can be no discrimination on such account, the Constitution itself provides for special provisions with regard to women and children. Thus, Articles 14 and Article 15 read together validate Section 497 of the IPC.
• Criminal law everywhere in the world serves as a guardian of the moral principles of society, protecting a society’s historical roots while leading it towards a progressive social order. If we start subjecting laws to our personal rationale, it would lead to chaos, as a counter-narrative would always exist.
• Critics of Section 497 allege that the law is sexist in nature, for it only criminalises the conduct of the man while excusing the woman. They say that in making the husband the only person who can prosecute for adultery, the law is founded upon the idea that the status of the wife in a marriage is akin to that of the property of the husband.

Legislative intent

• However, the legislative intent behind the enactment of Section 497 is quite different from what is perceived by these critics. In 1847, the Law Commission of India was given the responsibility of drafting a new penal code. The Commission rendered liable only the male offender, keeping in mind “the condition of the women in this country” and the law’s duty to protect it.
• While critics of Section 497 argue that the adultery law tries to dictate and intervene in the lives of two consenting adults, they forget how adultery wrecks the life of another. Generally, the people who advocate the decriminalization of adultery are those who define morality according to their whims and fancies.

The law deters the adulterer

• The intention behind criminalizing adultery in the present day is to deter the adulterer from committing such a crime again. One may argue that the law has failed to prevent the act of adultery. Such failure cannot be attributed to the law itself but to its enforcement.
• If such reasoning is to be taken into account, it would apply similarly to laws against rape, murder, trafficking, etc., but we do not talk about decriminalizing them, do we? If we were to bring down a single brick, the whole house would collapse.
• A welfare-oriented and inclusive country like India, while demanding that a marriage be registered in order to acknowledge and protect the rights of the parties involved, cannot do away with a crime which undermines the same legally recognised institution.
• Even if the Supreme Court were to decriminalise adultery, it would still remain intact in various personal laws, eventually leading to harrowing inconsistencies.

Need for amendment

• There is no denying that there exist ambiguities within Section 497 of the IPC.
• First, it only regulates the seemingly sordid conduct of the man who commits such a crime, all the while exonerating the voluntary conduct of the wife involved.
• Second, the benefit of such a law has not been extended to the wife whose husband engages in such an offence with another woman. However, such a plight can be resolved eventually by way of an amendment

India and Israel-Palestine dispute:

• Traditional policy stance: India voted for a negotiated settlement of the Jerusalem issue at the UN General Assembly with 127 other member countries.
• The resolution expressed deep “regret” on the December 7 declaration by U.S. President Donald Trump recognising Jerusalem as the capital.

Positive impacts:              

• The move is likely to serve India well as high-level visits are reportedly being planned between several Arab countries and India.

About the resolution

• The resolution, co-sponsored by Turkey and Yemen, called Trump’s recognition “null and void” and reaffirmed 10 Security Council resolutions on Jerusalem dating back to 1967
• These include requirements that the city’s final status must be decided in direct negotiations between Israel and the Palestinians
• It also demands that all states comply with Security Council resolutions regarding the holy city of Jerusalem and not to recognize any actions or measures contrary to those resolutions

Difference despite growing relationship

• New Delhi’s “yes” vote comes even as the government’s proximity to Israel and the US has grown
• Israel’s Prime Minister is expected to visit India next month and PM Narendra Modi had skipped Palestine during his visit to Israel in July this year

India in dilemma over Isreal-Palestine conflict

• New Delhi has, as a norm, always voted in favor of Palestine at the UN
• But in July 2015 it abstained from a vote against Israel at the UN Human Rights Council in Geneva
• This was seen as a subtle shift in India’s policy towards the Israeli-Palestinian issue

• India signed an agreement with Switzerland, that would allow automatic sharing of tax-related information from January 1 next year.
• Main aim: combat black money stashed abroad.

• India and China will hold the 20th round of negotiations on the border issues.
• The meeting will be headed by special representatives from both sides, National Security Advisor Ajit Doval and his Chinese counterpart Yang Jiechi.
• Various issues like the One Belt One Road initiative, China’s opposition to Indian membership at the Nuclear Suppliers Group (NSG) and the Indian opposition to China-Pakistan Economic Corridor (CPEC) might feature in the talks.
• New issue: pollution of the Siang river which has contaminated the flow of the mighty Brahmaputra in Assam.

B. GS3 Related

The introduction of the Goods and Services Tax (GST) raised much hope that it would herald the emergence of a ‘good and simple tax’ with ‘one nation, one market, one tax’.

• However, there has been considerable concern with the new tax, both in its structure and operational details, including the ease of paying the tax and filing returns.
• Trade and industry have been grappling with the problem of payment, filing the returns and claiming input tax credit, and exporters have been facing liquidity crises as the zero-rating of the tax has not worked and refunds have not been forthcoming, with difficulty in filing returns.
• GST Council has been quite responsive to tweak the structure and operational details to make it simpler. But, considerable work needs to be done to ensure a smooth transition and to reap the revenue and productivity gains to the economy.

Global experience of GST

• Introduction of the GST is an important reform and is a standard policy recommendation for every country going in for the structural adjustment programme of the International Monetary Fund. This has been a major money spinner and a source of productivity gain.
• According to Michael Keen, of over 165 countries which have adopted GST in one form or another, only five have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later.
• The GST has taken centre-stage in many countries and is considered important in view of the competitive reduction in corporation tax rates due to high mobility of capital.
• It is also true that there is no “one-size fits all” GST and each country has to adopt the structure depending on political bargains and operational feasibility.
• It is a major reform, and even as every country makes a lot of preparations before it is introduced, it takes time to smoothen the rough edges and settle contentious issues.
• International experience shows that some features of the reform are inherently desirable. It is important not to have too low thresholds.
• In fact, reasonably high thresholds will reduce the compliance burden to a large number of small businesses without much impact on revenue.
• Richard Bird and Pierre-Pascal Gendron, after a detailed examination of a number of countries adopting GST, suggest that in developing countries, a threshold closer to $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%.
• Another desirable feature of a successful GST is to have fewer rates. Multiple rates create classification problems, are harder to administer and would require the general rate of tax to be higher. It would also invite a lot of lobbying by special interest groups.
• Third, it is important to prepare well before the plunge. Most countries take at least two years to prepare for the introduction of reform to ensure a smooth transition.
• This is particularly necessary for developing and testing the technology platform, educating the tax collectors and tax payers and to avoid any anomalies in the structure of the tax.

The Indian version

• In the Indian context, given that the reform had to be evolved by taking into account the views of 29 States, two Union Territories with legislatures and the Union government, compromises are inevitable and it is impossible to expect the structure of the tax to be ideal. As stated by Bird and Gendron, some bad initial features may be an essential compromise to get the tax accepted in the first place.
• It would have been preferable to evolve the structure with two rates, one lower on items of common consumption and another general rate on consumer durables and luxuries.
• Notably, given that the VAT in the earlier regime had predominantly two rates, it should have been possible to convince the States of the need to fix the GST ratesat two rather than four.
• In addition, the levy of three rates of cesses has further complicated the structure. Having four tax rates and three rates of cesses should have been avoided.
• As mentioned above, multiple rates create problems of classification, inverted duty structure and large-scale lobbying. It enormously complicates the technology platform to ensure input tax credit mechanism.
• It therefore appears desirable to move immediately towards three slabs with the final goal of reducing the slabs to two. It would also have been desirable for the fitment committee to evolve the rates by thinking afresh instead to merely adding up the excise and VAT rates to fit the item to the nearest rate decided.
• This is particularly relevant in the case of commodities which are predominantly inputs as in the earlier VAT regime they were placed in the lower rate category. Hopefully, the GST Council will act soon on this.

Raising the threshold

• As mentioned above, expert opinion based on international experience shows that there is much to be gained by having the threshold at reasonably high levels.
• As mentioned above, international experience is that a threshold closer to $100,000 would eliminate 75% of the taxpayers and the sacrifice in terms of revenue would be less than 4%.
• Moreover, it is the small businesses which produce and trade in commodities and services which are predominantly consumed by low income groups and therefore, keeping the threshold high would be desirable from the viewpoint of equity as well.
• Considering this, going further, it may be desirable to fix the threshold at ₹50 lakh. The revenue loss will be minimal but ease of doing business will be high. The inclusion of petroleum products in the GST base will depend on mainly the revenue gains from the reform.
• Nevertheless, it is a desirable objective and the GST Council must act on it. International experience shows that including real estate may not be easy.

Steps ahead

• There is some concern that the revenues from GST in the past few months are somewhat below expectations. Things could improve as the new changes bring in stability and technology platform stabilizes. Hopefully the implementation of GST may help in augmenting income tax as well.
• Strong political commitment, to implementing the reform, thorough advance preparation, adequate investment in tax administration and taxpayer services, extensive public education programme, support from business community and good timing of reform are the important pre-requisites for successful implementation of the GST.
• It is also important to note that problems of transition to a major tax reform are unavoidable and most countries go through this. In this regard, the approach of the GST Council must be commended for being receptive to the concerns of businesses and in dealing with the glitches in technology.
• Some of the noise heard is also due to the fact that all traders, in one way or the other, are brought into the formal sector. That hurts some. The GST Council has recognized that it needs to carefully calibrate the reform until the desired goal of a Good and Simple Tax is realized. Hopefully the GST Council will keep the goals clear and consider the reform effort as a work in progress.

• Government is planning to increase funding for the farm and rural sectors in the budget for the coming fiscal year.
• Higher procurement prices for different crops could be offered to farmers following lower output this year.
• Key fact: Annual farm growth dipped to 1.7% in the three months ending September, mainly on lower prices and output, while economic growth accelerated to 6.3% after growing at a three-year low of 5.7% in the previous quarter.

Highlights of Financial Stability Report released by the Reserve Bank of India (RBI):

• Private sector banks registered a 40.8% year-on-year increase in gross non-performing assets as of September 30, 2017.
• In comparison, gross NPAs at public sector banks (PSBs) rose by 17% over the corresponding period, while industry wide gross NPAs increased 18.5%.

Stress test:

• The macro stress test for credit risk indicates that under the baseline macro scenario, the GNPA ratio may increase to 10.8% by March 2018 and further to 11.1% by September 2018.
• The report observed that the ongoing deleveraging in the heavily indebted parts of the corporate sector and muted credit growth in public sector banks pose a risk to growth.
• Subdued credit, which may also be a consequence of thin capital buffers of PSBs, leads to lower investments in the economy.
• Credit growth in major sectors as well as industries has witnessed a decline over the past two years.
• The RBI noted that the number and cost of stalled projects reported in the second quarter of the current fiscal had declined from the first quarter.

Highlights of International Monetary Fund’s Financial Sector Assessment Programme (FSAP) report:

• India’s financial sector is facing considerable challenges-With high non-performing assets and repair of corporate balance sheets testing the resilience of the banking system, India’s financial sector is facing considerable challenges.This is also holding back investment and growth

Financial System Stability Assessment (FSSA)

• The last FSSA for India was done in 2011
• It is conducted jointly by a team of the IMF and the World Bank
• The FSAP aims at having a very comprehensive and in-depth view of the financial system in countries with big systemic financial systems
• The FSAP took stock of the considerable progress made in strengthening financial sector oversight and identified areas where scope for further improvement remains

Public sector banks vulnerable

• Stress tests show that a group of public sector banks (PSBs) are highly vulnerable to further declines in asset quality and higher provisioning needs
• Capital needs range from 0.75 percent of GDP in the baseline to 1.5 percent of GDP in the severe adverse scenario

Role of state

• The state retains an important footprint in the system via ownership of large financial institutions, captive government financing, and directed credit to priority sectors
• It has also taken measures like strengthening the RBI’s de jure independence, expanding other financial regulators’ resources, introducing a risk-based solvency regime and extending risk-based supervision for insurers; and unifying the oversight of commodities markets

• The concentration of particulate matter in Delhi reached toxic levels.
• The Met department said that visibility fell to 400 metres in the morning
• Central Pollution Control Board: The air quality index for Delhi, Ghaziabad and Noida were in the ‘severe’ category with values of 469, 500 and 500.
• Delhi’s AQI(Air Quality Index) had been in the ‘poor’ or ‘very poor’ category for about a month now, after a spell of smog in November.
• Gurugram and Faridabad recorded AQIs of 346 and 358 — both in the ‘very poor’ category.
• The Environment Pollution (Prevention and Control) Authority issued warnings to the NCR State governments to prepare for emergency measures.
• States of Uttar Pradesh, Delhi, Haryana and Rajasthan governments: level of both PM2.5 and PM10 were in the ‘severe+’ zone

Basic Information:

The AQI is an index for reporting daily air quality. It tells you how clean or polluted your air is, and what associated health effects might be a concern for you. The AQI focuses on health effects you may experience within a few hours or days after breathing polluted air. EPA calculates the AQI for five major air pollutants regulated by the Clean Air Act: ground-level ozone, particle pollution (also known as particulate matter), carbon monoxide, sulfur dioxide, and nitrogen dioxide. For each of these pollutants, EPA has established national air quality standards to protect public health .Ground-level ozone and airborne particles are the two pollutants that pose the greatest threat to human health in this country.

The purpose of the AQI is to help you understand what local air quality means to your health. To make it easier to understand, the AQI is divided into six categories:

D. GS4 Related

E. PRELIMS FACT

F. Practice Questions for UPSC Prelims Exam

1. What characteristics can be assigned to monsoon climate that succeeds in feeding more than 50 percent of the world population residing in Monsoon Asia?

GS Paper IV

Also, check previous Daily News Analysis