Table of Contents:
A. GS1 Related:
B. GS2 Related:
C. GS3 Related:
D. GS4 Related:
Useful News Articles
A. GS1 Related
— Nothing here today, folks! —
A. GS2 Related
1. Bastar villagers forced to surrender as Maoists: rebel leader
Category: rights issue,governance
- The outlawed Communist Party of India (Maoist) has said that right wing activists are creating havoc in the Bastar region of Chhattisgarh in the name of anti-Maoist operations
- the Maoist leader asked the government to dissolve the District Reserve Guard (DRG), a recently formed special anti-Maoist unit of Bastar police
- DRG consisting largely of local tribal youth include some former dreaded Maoist leaders too
2. Syria rebels say government is wrecking truce deal
Topic: International Relations
Category: global issues
- A senior official from Syria’s main opposition group said on Monday that the first major attempt to halt the fighting after 5 years of war was in danger of total collapse because of attacks by government forces
- UN Secretary-General Ban Ki-moon said the pause in the fighting was largely holding, despite some incidents
- The Kremlin said the process was under way, although it had always been clear it would not be easy
- Syrian Observatory for Human Rights said the cessation was largely holding with casualties greatly reduced compared to before the agreement took effect
- The UN and other agencies hope to deliver aid to more than 150,000 people in the next five days
3. Wigneswaran seeks India’s help on new Constitution
Topic: International Relations
Category: Effect of policies of countries on India’s interests
- Chief Minister of Sri Lanka’s Northern Province C.V. Wigneswaran on Monday called upon India to ensure that the spirit of federalism in the 13th Constitutional Amendment be retained in the new Constitution
- The 13th Amendment, an outcome of the 1987 India-Sri Lanka accord, is the “only document” through which India could function as the “guarantor” of interests and rights of Tamils in Sri Lanka, he said
- With the enactment of the Provincial Councils Act of 1987, autonomy granted to provinces under the Amendment has been taken away
- This is why the demand is being made for the repeal of the Provincial Councils Act and adherence to the original character of the Amendment
- Wigneswaran recalled how Constitutional experts from India got involved in the process of drafting the 13th Amendment
A. GS3 Related
- How does the government earn money?
Corporation tax and income tax together constitute one third of the total government earnings.
Of the Total TAX — Rs. 16,30,887.81 crore — collected by the central government, corporation tax has the major share, though it has declined from 39 per cent in 2009-10 to estimated 30.2 per cent in 2016-17.
On the other hand, the share of service tax has gradually increased
Government’s earnings broken down
Corporation tax 19%
Income tax 14%
Borrowings and other liabilities 21%
Non-tax revenue 13%
Excise duties 12%
Service tax and other taxes 9%
Non-debt capital receipts 3%
From 2006-07, the government has released a statement of revenue that is forgone, which analyses the revenue loss due to the tax incentives available under the Central Tax system
For 2016-17, this amount is projected to be Rs. 6,11,128.31 crores — approximately a third of the total government revenue
In contrast, subsidies on various sectors amount to Rs. 2,50,432.93 crores in this year’s allocation
- Proposed spending for the financial year 2016-2017:
plan expenditure Rs 5.5 lakh crore
(15.3 percent increase from revised estimates of previous year)
Non-plan expenditure Rs 14.28 lakh crore Total expenditure Rs 19.78 lakh crore
- Ministries that gained much
Proposed allocation to Ministry of Women and Child Development has increased by 313 per cent, from Rs. 747 crores in 2015-16 to Rs. 3,094 crores in 2016-17.
Ministry of Land Resources has been allocated Rs. 230.51, a 437 per cent increase from Rs. 43.71 crore last year.
A 13 per cent increase in Higher Education allocation, from Rs. 25,344 crore to Rs.28,765 crore.
Ministry of Civil Aviation has been allocated Rs. 2,590.68 crore, a 38 per cent decrease from Rs. 4,198 crore.
(All comparisons are between revised estimates for 2015-16 to revised estimates for 2016-17)
- Comparison with BRICS nations
Russia has the highest military allocation in percentage terms, followed by India and China. For education and health, India has the lowest allocation in percentage terms
Category: State of Indian Economy
- Infrastructure and agriculture cess to be levied.
- Excise duty raised from 10 to 15 per cent on tobacco products other than beedis
- 1 per cent service charge on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.
- SUVs, Luxury cars to be more expensive. 4% high capacity tax for SUVs.
- Companies with revenue less than Rs 5 crore to be taxed at 29% plus surcharge
- Limited tax compliance window from Jun 1 – Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties- A chance for tax evaders to come clean
- Excise 1 per cent imposed on articles of jewellery, excluding silver.
- 5 per cent Krishi Kalyan Cess to be levied on all services.
- Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models.
- Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10 per cent
- Personal Finance
- No changes have been made to existing income tax slabs
- Rs 1,000 crore allocated for new EPF (Employees’ Provident Fund) scheme
- will pay EPF contribution of 8.33% for all new employees for first three years
- Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses.
- Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh.
- Service tax exempted for housing construction of houses less than 60 sq. m
- 15 per cent surcharge on income above Rs. 1 crore
- 38,500 crore for Mahtma Gandhi MGNREGA for 2016-17
- Swacch Bharat Abhiyan allocated Rs.9,500 crores.
- Hub to support SC/ST entrpreneurs
- Government is launching a new initiative to provide cooking gas to BPL families with state support.
- LPG connections to be provided under the name of women members of family: Rs 2000 crore allocated for 5 years for BPL families.
- 87 lakh crore grants to gram panchayats and municipalities – a quantum jump of 228%.
- 300 urban clusters to be set up under Shyama Prasad Mukherji Rurban Mission
- Four schemes for animal welfare.
- 2 lakh renal patients added every year in India. Basic dialysis equipment gets some relief.
- National Dialysis Service Prog with funds thru PPP mode to provide dialysis at all district hospitals
- A new health protection scheme for health cover upto 1 lakh per family.
- Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme
- PM Jan Aushadhi Yojana to be strengthened, 300 generic drug store to be opened
- Scheme to get Rs.500 cr for promoting entrepreneurship among SC/ST
- 10 public and 10 private educational institutions to be made world-class.
- Digital repository for all school leaving certificates and diplomas. Rs. 1,000 crore for higher education financing.
- 1,700 crore for 1500 multi-skill development centres.
- 62 new navodaya vidyalayas to provide quality education
- Digital literacy scheme to be launched to cover 6 crore additional rural households
- Entrepreneurship training to be provided across schools, colleges and massive online courses.
- Objective to skill 1 crore youth in the next 3 years under the PM Kaushal Vikas Yojna
- National Skill Development Mission has imparted training to 76 lakh youth. 1500 Multi-skill training institutes to be set up.
- 3000 crore earmarked for nuclear power generation.Govt drawing comprehensive plan to be implemented in next 15-20 years for exploiting nuclear energy
- Govt to provide incentive for deepwater gas exploration
- Deepwater gas new disc to get calibrated market freedom, pre-determined ceiling price based on landed price of alternate fuels.
- Investments and infrastructure
- 27,000 crore to be spent on roadways
- 65 eligible habitats to be connected via 2.23 lakh kms of road. Current construction pace is 100 kms/day
- Shops to be given option to remain open all seven days in a week across markets.
- 55,000 crore for roads and highways. Total allocation for road construction, including PMGSY, – Rs 97,000 crore
- India’s highest-ever production of motor vehicles was recorded in 2015
- Total outlay for infrastructure in Budget 2016 now stands at Rs. 2,21,246 crore
- New greenfield ports to be developed on east and west coasts
- Revival of underserved airports. Centre to Partner with States to revive small airports for regional connectivity
- 100 per cent FDI in marketing of food products produced and marketed in India
- of Disinvestment to be renamed as Dept. of Investment and Public Asset Management
- Govt will amend Motor Vehicle Act in passenger vehicle segment to allow innovation.
- MAT will be applicable for startups that qualify for 100 per cent tax exemption
- Direct tax proposals result in revenue loss of Rs.1060 crore, indirect tax proposals result in gain of Rs.20,670 crore
- Total allocation for agriculture and farmer welfare at Rs 35984 crores
- 5 lakh hectares of land will be brought under irrigation.
- 5 lakh acres to be brought under organic farming over a three year period
- Rs 60,000 crore for recharging of ground water recharging as there is urgent need to focus on drought hit areas cluster development for water conservation.
- Dedicated irrigation fund in NABARD of Rs.20.000 cr
- Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojna.
- Banks get a big boost: Rs 25,000 crore towards recapitalisation of public sector banks.Banking Board Bureau will be operationalised
- Target of disbursement under MUDRA increased to 1,80,000 crore
- Process of transfer of government stake in IDBI Bank below 50% started
- General Insurance companies will be listed in the stock exchange
- Govt to increase ATMs, micro-ATMs in post offices in next three years
Note: the CPI inflation has come down to 5.4% from 9 plus which has been a relief to common man
- Accumulated savings under the National Pension Scheme (NPS) that were fully taxable at the time of retirement would now be taxable only for 60 per cent of the retirement corpus
- The same logic has been extended to the EPF making 60 per cent of savings taxable at the time of withdrawal. EPF contributions, income as well as the final corpus at retirement were tax-free till now
- Earlier, people were choosing one product or the other on the basis of the tax they would have to pay
- Now, that has gone. By making all the schemes at par, employees will choose between them on the basis of their efficiency and returns
- It is proposed to provide that redemption by an individual of Sovereign Gold Bond issued by RBI under Sovereign Gold Bond Scheme, 2015 shall not be charged to capital gains tax
- Those earning less than Rs. 5 lakh a year will now receive a tax rebate of Rs. 5,000 under section 87A, up from a rebate of Rs. 2,000 earlier
- There are two crore tax payers in this category who will get a relief of Rs. 3,000 in their tax liability
- At the moment, people who do not own a house and do not get house rent allowance receive a tax deduction of Rs. 24,000 per year from their income. It is proposed that this limit be increased to Rs. 60,000 per year
4.Government tweaks Securities Transaction Tax
- Securities Transaction Tax was increased on sale of stock options from 0.017% to 0.05%
- New tax- dividend distribution tax was introduced
- Dividend income in excess of Rs. 10 lakh would be taxed at 10 per cent. The silver lining is that limit of Rs. 10 lakh would effectively insulate small investors from the new tax
- The investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 per cent to 15 per cent on par with domestic institutions
- This will enhance global competitiveness of Indian stock exchanges and accelerate adoption of best-in-class technology and global market practices
5.No big measures, say educationists
- 71,139 crore, the total allocation to education, comprises 3.7 per cent of the Gross Domestic Product, a fall of one per cent from last year
- Finance Minister ’s statement that universal education has been achieved has been viewed with cynicism as it is still a distant goal
- There is only marginal increase in the allocation to primary education
- The emphasis on vocational skills, many educationists fear, will come at the cost of education
- despite announcements like the setting up of 62 Navodaya Vidyalayas and a digital literacy scheme for rural India — there is little mention of quality education
- the Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and the Rashtriya Uchchatar Shiksha Abhiyan (RUSA), both part of the 12th Five-Year Plan, found no mention in the budget
6. Make In India initiative gets a leg up
- To help start-ups innovate, generate employment and be key partners in the MII programme, 100 per cent tax deduction for three out of five years for start-ups set up during April 2016 to March 2019 is.
- Minimum Alternate Tax will apply in such cases
- It is proposed to grant foreign investors ‘Residency Status’ subject to certain riders. Currently, these investors are granted business visa only up to five years at a time
- To strengthen the MII initiative, there was an allocation of Rs.1,804 crore towards the scheme for Investment Promotion and Amended Technology Upgradation Fund
- Centre has marginally increased Customs Duty on finished goods in some cases while reducing the duty on raw materials/components to push local manufacturing also several procedures have been simplified.
- This was done to bring down costs and improve competitiveness of the domestic industry in many sectors
- the Centre has decided to pay the Employee Pension Scheme contribution of 8.33 per cent for all new employees enrolling in EPFO for the first three years of their employment
- To channelise this intervention towards the target group of semi-skilled and unskilled workers, the scheme will be applicable to those with salary up to Rs. 15,000 per month
- a budget provision of Rs. 1,000 crore had been made for this scheme
D. GS4 Related
E. Important Editorials : A Quick Glance
1. Loud on Spending, Silent on the Math
Location: The Economic Times, Page 15
- the commitment to maintain fiscal deficit at 3.5% of GDP stands out in the budget
- But it is not clear how this is consistent with the increase in public spending on several schemes enumerated
- Given nominal GDP grows at 11%,tax revenue net to Centre is expected to increase by 11.2% over revised estimates(2015-16), while expenditure is to increase by 10.8%.
- So, one has to wait and see how credible the commitment to contain fiscal deficit is(the expected increase may or may not happen)
- Agriculture has suffered because of two successive years of drought
- The external environment is also not encouraging as seen in negative growth rates in exports
- There are no new proposals that can lead directly to a pick-up in private investment
- The Budget is silent about progress made in relation to initiatives announced last year like the National Investment and Infrastructure Fund and Mudra
- The emphasis seems to be on public spending in infrastructure and other sectors when private investment is faltering
- On the tax front, there are no major changes. The expected reduction in corporate tax rate hasn’t happened
- The financial system, particularly banking, is under strain. The provision of 25,000 crore for recapitalization may be inadequate
- The Budget has not made any dramatic changes
- It has sought to increase public expenditure in critical areas, which will have the desired impact only if they are implemented in a time-bound manner
- If expenditure rises above estimates, the government must be willing to raise additional revenue. Only then will the budgeted fiscal deficit stick
- A standout feature of the Budget for 2016-17 is that it is overtly ‘political’ even as it escapes being populist
- There is unmistakable emphasis on rural and social sectors
- Two straight years of deficient monsoon and a damaged rabi crop in 2015 has led to much rural discontent
- With the domestic corporate sector still deeply in debt and export demand unlikely to look up soon, the Centre has no option but to take the driver’s seat to keep growth going at the current seven-plus levels
- Apart from public investment, another remarkable feature of the Budget is its emphasis on reforming the direct tax system along the lines suggested by the Easwar panel.
- This entails both rationalising direct tax proposals by removing exemptions and anomalies, and making the tax collection machinery more reasonable and business-friendly.
- Efforts to extend the slab of ‘presumptive taxation’ (like MAT) will reduce hassles for small businesses.
- The govt, however, has not departed from the unfortunate trend of mopping up revenues essentially through indirect rather than direct taxes
- Direct tax revenues must increase sharply for the state to be able to discharge its obligations
3. A message aimed at the heart of India
- A cess of 0.5 per cent on all taxable services that would expressly be used to finance improvements in agriculture
- a dedicated long-term irrigation fund with a corpus of Rs.20,000 crore has been created
- Central government will spend an outlay of Rs.19,000 crore this year on rural roads as part of its goal to ensure that all habitations are connected by 2019
- There is also push to achieve universal village electrification in the next two years
- The Budget proposes the introduction of a health insurance scheme that would provide up to Rs.1 lakh as coverage against hospitalisation costs for economically weak households, with senior citizens above the age of 60 eligible for another Rs.30,000 in top-up cover
- The other, equally laudable, initiative is to provide all families below the poverty line with cooking gas
- a committee to review the entire road map mandated by the Fiscal Responsibility and Budget Management Act of 2003 is being set up
- the Union Budget paves the path for making good Prime Minister ’s promise to double farm incomes by 2022
- the allocation for the Department of Agriculture, Cooperation and Farmers’ Welfare (DoA), is raised from the revised estimate (RE) of Rs 15,809 crore in FY16 to a budgeted estimate (BE) of Rs 35,983 crore for FY17, a whopping increase of 127 per cent
- Much of the increase (Rs 15,000 crore) is due to interest subsidy on short-term credit. Earlier, this subsidy was Rs 13,000 crore and was shown under the Department of Financial Services. Now, it’s transferred to the DoA
- the Pradhan Mantri Fasal Bima Yojana, which the PM had been calling a game-changer, gets Rs 5,500 crore
- the infrastructure to directly transfer the benefits is not in place
- on irrigation, surely there’s some focus through the Pradhan Mantri Krishi Sinchai Yojana. However, the budgeted amount under its four components (Rs 7,392 crore) isn’t very different from the RE of FY16 (Rs 7,589 crore)
- there’s a provision to create a long-term dedicated fund under the Nabard for Rs 20,000 crore for irrigation and another proposed one of Rs 6,000 crore for groundwater
- The augmentation of irrigation facilities and proper water management holds the key for turning around Indian agriculture
- But the allocations are still not enough to make a dent in the next two-three years
- There are many other smaller but positive steps from organic farming to 100 per cent FDI in food processing to the e-national market
- But all of these will take time for concrete results. They aren’t game-changers
- Where the budget has disappointed is the lack of any bold move to rationalise the biggest resource guzzlers — food and fertiliser subsidies. That’s where the biggest scope for savings was
- The budget stopped at just doing some pilots in fertiliser subsidy for DBT — not enough to make much difference to the farm sector.
F. Concepts-in-News: Related Concepts to Revise/Learn:
i. Fiscal Deficit
ii. FRBM Act
v. Easwar panel
vi. Corporate tax
G. Fun with Practice Questions 🙂
Question 1: Which of the statements given below are correct about deep water gas exploration?
- Deep water gas exploration involves finding oil and gas deposits buried deep under the ocean floor
- There are mobile and fixed drilling rigs
- The Fixed Platform is anchored to the sea floor so it is very costly to build.
- Mobile platforms are used mostly for shallow or non-permanent oil and gas deposits
a) 1 and 2 Only
b) 1, 2, and 3 Only
c) 3 and 4 Only
d) All of the above
Question 2:Which of the statements given below are correct?
1 .Nominal GDP takes inflation into account
2) GDP at constant prices does not involve adjusting for the price of inflation
3) GDP at factor cost is GDP at market prices adding subsidies and subtracting indirect taxes
a) 1 only
b) 1 &2
c) 3 only
d) 1,2 and 3
Question 3:Which of the following are examples of direct taxes?
- Income tax
- Corporate tax
d)All the above
Question 4:Which of the below statements are true about Easwar panel?
a) A high level panel on simplification of income tax laws
b) A high level panel on governance reforms
c) A high level panel on rationalization of subsidies
d) A high level panel on banking reforms
Question 5:consider the following statements:
- The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) aims to institutionalise financial discipline and increase fiscal deficit
- The main purpose of the act is to eliminate revenue deficit
- It aims to prohibit government borrowings from the Reserve Bank of India
Which of the above statements is/are correct with regard to FRBM Act in India?
a)1 and 2
b)2 and 3
d) 1, 2 and 3
You can check out some more recent News Analysis sections to build even more context
24th January 2016: Daily News & Current Affairs Analysis
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