Comprehensive News Analysis – 02 February 2017

Table of Contents:

A. GS1 Related:
B. GS2 Related:
C. GS3 Related:

1. Consumers spared from additional tax burden

2. A Budget for sustainable growth

D. GS4 Related:
E. Important Editorials : A Quick Glance

The Hindu

1. A fine balance

The Indian Express

1. No playing to the gallery

PIB

1. Budget gives a major push to Digital Economy; proposes No Cash Transaction above Rs 3 lakh

2. Pradhan Mantri Kaushal Kendras to be extended to all over the Country

3. “SWAYAM” Platform will be launched to leverage Information Technology

F. Concepts-in-News: Related Concepts to Revise/Learn:
G. BILLS/ACTS/SCHEMES/ORGS IN NEWS
H. Fun with Practice Questions 🙂
I. Archives

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Useful News Articles

A. GS1 Related

Nothing here for Today!!!

B. GS2 Related

Nothing here for Today!!!

C. GS3 Related
1. Consumers spared from additional tax burden

Category: Indian Economy

Topic: Government Policy

Key Points:

  • With Finance Minister Arun Jaitley deciding against imposing any additional indirect tax burden on them, ahead of the implementation of the Goods & Services Tax (GST) on July 1, 2017, consumers received a major respite.
  • Importantly, in his budget speech, the Finance Minister said that “Implementation of GST is likely to bring more taxes both to Central and State Governments because of the widening of the tax net. I have preferred not to make many changes in the current regime of excise and service tax because the same are to be replaced by GST soon,”
  • It is important to note that the budget estimates project a revenue growth of 8.8% in indirect tax revenue as opposed to 15.3% growth in direct tax revenue, without any major increase in the tax rates, which means the focus is on increased compliance by broadening the tax base rather than raise the tax rates.

 

2. A Budget for sustainable growth

Category: Indian Economy

Topic: Government Policy, Budgeting

Key Points:

  • It has been observed that there are three principle goals of the this year’s budget.
  1. It wants to revive the flagging domestic investment, which has threatened to turn turtle. 
  2. It responds to the dire requirement for urgently generating a large number of employment opportunities for the increasingly restive youth.
  3. It aims at cleansing the economy of black money flows and illegal incomes, thereby sharply squeezing the scope and space for the parallel economy. 

It is important to note that following the enactment of the Benami Properties and Illegal Income Acts and demonetisation, the Budget has announced a direct attack on the fountainhead of political corruption by reducing the amount of individual donations to political parties to a paltry Rs. 2,000, as recommended by the Election Commission.

New Initiatives

The Budget also has three firsts to its credit.

  • By presenting it on February 1, the Finance Minister has ensured that the rather inefficient practice of ‘vote on account’ will be avoided and the finance bill will now be approved by the end of the present fiscal year.
  • Second, the somewhat spurious and dysfunctional distinction between plan and non-plan expenditure has been done away with, which will permit a clearer distinction between the share of capital and revenue expenditure.
  • As its third new initiative, this Budget has done away with the colonial legacy of a separate Railway Budget.

 

D. GS4 Related
E. Important Editorials: A Quick Glance
The Hindu
  1. A fine balance

Category: Indian Economy

Topic: Government Policy

Key Points:

  • In the wake of the demonetization initiative of the Government, it was imperative that Union Finance Minister Arun Jaitley soothed frayed nerves with Budget 2017-18. 
  • Further, it was equally important that he provided a glimpse of a larger plan to prevent regeneration of black money.
  • It has been observed that he managed to do both to a fair degree, without resorting to blatant populism.
  • Significantly, the tax rate for small and medium enterprises with an annual turnover of up to Rs. 50 crore, which are the bulwark of job-creation but end up paying higher taxes than large companies, has been slashed to 25%.
  • For corporates, though, there is no road map on lower tax rates.
  • In addition, halving the personal income tax rate from 10% to 5% for those in the lowest tax slab of Rs. 2.5 lakh to Rs. 5 lakh not only puts more money in the hands of this segment, but is also an effective nudge to bring more people into the formal tax net.
  • All other taxpayers have been given a benefit of Rs. 12,500 each.
  • Jaitley said that demonetisation has helped transfer resources from tax-evaders to the government. 
  • It is important to note that although there may be no big new schemes or dramatic reforms; the big bang in this Budget is the shift from unfettered populism.
  • In conclusion, it is important to note that apart from the dovetailing of the railway budget, the abolition of the distinction between Plan and Non-Plan expenditure and its early presentation, Union Budget 2017-18 marks another break from tradition.

 

The Indian Express

1. No playing to the gallery

Category: Indian Economy

Topic: Government Policy

Key Points:

  • It is important to note that there was every temptation for theNarendra Modi government to present a budget that played to the gallery. 
  • It has been observed that the fact that this did not happen and there weren’t too many surprises, positive or negative, is the best takeaway from the Union Budget for 2017-18.
  • Finance MinisterArun Jaitley’s fourth budget has, more or less, stuck to his government’s fiscal consolidation roadmap of reducing the fiscal deficit to 3 per cent by 2017-18. 
  • There was lot of chatter, including in the latest Economic Survey, about impractical ideas like a universal basic income scheme or using the Reserve Bank of India’s “excess capital” to recapitalise state-owned banks — the budget has, nevertheless, not gone overboard in the zeal to contain deficits.
  • An interesting move is the enabling of the issuance of electoral bonds by political parties. Donors can purchase such bonds from authorised banks and these can be redeemed only in the designated accounts of registered political parties. While helping to retain the anonymity of the donors, it is a welcome initiative for cleansing of electoral funding — whether and how it will work on the ground remains to be seen.

The Big Question

Will the latest budget bring back growth and revive the animal spirits of investors? The honest answer is: It is unlikely to do so. 

The budget does give a big push for rural development through increased outlays for the Pradhan Mantri Gram Sadak Yojana and the MGNREGA, while aiming at creation of productive assets under the latter. There are also sops for affordable housing, including through the grant of infrastructure status and allowing flexibility in unit area requirements to qualify for benefits. 

 

PIB

1. Budget gives a major push to Digital Economy; proposes No Cash Transaction above Rs 3 lakh

Category: Indian Economy

Topic: Government Policy

Key Points:

  • In a bid to give a push to Digital Economy and weed-out corruption and black money, the Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley in his Budget Speech said that the Government has decided that no transaction above Rs 3 lakh will be permitted in cash. Accepting a suggestion by Special Investigation Team on Black Money to ban cash transactions above Rs 3 lakhs, the Finance Minister has proposed an amendment to the Income-tax Act in the Finance Bill.
  • Presenting the General Budget 2017-18 in the Parliament, the Finance Minister said that the Government will launch two new Schemes to promote the usage of BHIM App i.e, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.
  • BHIM App was launched to promote digital transactions and will unleash the power of mobile phones for digital payments and financial inclusion,
  • The Finance Minister Shri Jaitley informed the House that 125 lakh people have adopted the BHIM app so far.
  • The Finance Minister Shri Jaitley also announced that Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly.
  • This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A Mission will be set-up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhar based PoS by September 2017.
  • Highlighting the Government’s strategy to clean the system through digital economy, Shri Jaitley said that it has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit.
  • India is now on the cusp of a massive digital revolution, he added.
  • The Finance Minister said that a shift to digital payments has huge benefits for the common man.
  • The earlier initiative of the Government to promote financial inclusion and the JAM trinity were important precursors to the current push for digital transactions, the Finance Minister added.
  • In a bid to incentivize the digital transactions, the Finance Minister Shri Jaitley proposed that the presumptive income tax for small and medium tax payers whose turn-over is up to Rs 2 crore will be reduced from the present 8% of their turnover which is counted as presumptive income to 6% in respect of turnover which is received by non-cash means. This benefit will be applicable for transactions undertaken in the current year also, he added.
  • The Finance Minister also proposed to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, up to Rs 10,000.
  • Similarly, the limit of cash donation which can be received by a Charitable Trust is being reduced from Rs 10,000/- to Rs 2000/-.
  • To promote cashless transactions, the Finance Minister in the Budget has proposed to exempt BCD, Excise/CV duty and SAD on miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners. He also proposed to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.
  • To strengthen and regulate the digital economy, the Finance Minister has proposed to create a Payments Regulatory Board in the Reserve Bank of India(RBI) by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems.  
  • The Committee on Digital Payments constituted by the Department of Economic Affairs has recommended structural reforms in the payment eco system, including amendments to the Payment and Settlement Systems Act, 2007.
  • The Government will undertake a comprehensive review of this Act and bring about appropriate amendments, Finance Minister added.
  • To strengthen the digital payment infrastructure and grievance handling mechanisms, the Finance Minister said in his Budget Speech  that the focus would be on rural and semi urban areas through Post Offices, Fair Price Shops and Banking Correspondents.
  • He added that steps would be taken to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including BHIM App. A proposal to mandate all the Government receipts through digital means, beyond a prescribed limit, is under consideration. The Government will strengthen the Financial Inclusion Fund to augment resources for taking up these initiatives, the Finance Minister added.
  • In his Budget Speech, the Finance Minister informed that increased digital transactions will enable small and micro enterprises to access formal credit. He said that the Government will encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.
  • The Finance Minister assured the House that the Government will consider and work with various stakeholders for early implementation of the interim recommendations of the Committee of Chief Ministers on digital transactions.
  • Shri Jaitley said that the Government is considering the option of amending the Negotiable Instruments Act to ensure that the payees of dishonoured cheques are able to realise the payments.

 

  1. Pradhan Mantri Kaushal Kendras to be extended to all over the Country

Category: Indian Economy

Topic: Government Policy

Key Points:

  • The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley while presenting the General Budget 2017-18 in Parliament said that the Government proposes to extend the number of Pradhan Mantri Kaushal Kendras from current 60 to cover more than 600 districts across the country. He said 100 India International Skills Centres will be established across the country. These centres would offer advanced training and also courses in foreign languages. This will help those of our youth who seek job opportunities outside the country.
  • The Finance Minister Shri Arun Jaitley said that in the Financial Year 2017-18, a programme SANKALP (Skill Acquistion and Knowledge Awareness for Livelihood Promotion Programme) will also be launched at a cost of Rs. 4,000 crore. SANKALP will provide market relevant training to 3.5 crore youth.

 

  1. “SWAYAM” Platform will be launched to leverage Information Technology

Category: Indian Economy

Topic: Government Policy

Key Points:

  • The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley while presenting the General Budget 2017-18 in Parliament said that the Government proposes to leverage information technology and launch SWAYAM Platform with at least 350 online courses.
  • In his Budget Speech, the Finance Minister said this will enable students to virtually attend the courses taught by the best faculty; access high quality reading resources, participate in discussion forums; take tests and earn academic grades.
  • Access to SWAYAM would be widened by linkage with DTH channels, dedicated to education.
F. Concepts-in-News: Related Concepts to Revise/Learn:
  • SANKALP
  • BHIM App
G. BILLS/ACTS/SCHEMES/ORGS IN NEWS
BILLS/ACTS/SCHEMES/ORGANISATIONS IN NEWS Links to Refer
The National Policy for Children http://pib.nic.in/newsite/PrintRelease.aspx?relid=118660
H. Fun with Practice Questions 🙂
Question 1: With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? 
  1. Balance of trade
  2. Foreign assets
  3. Balance of invisibles
  4. Special Drawing Rights

Select the correct answer using the code given below. a) 1 only b) 2 and 3 c) 1 and 3 d) 1, 2 and 4

Question 2: The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', sometimes appearing in news, are used in relation to

Which of the above statements is/are incorrect? a) banking operations b) communication networking c) military strategies d) supply and demand of agricultural products

Question 3: Consider the following statements,
  1. The “Acworth Report”, led to reorganization of Indian Railways; thus separating the railway finances of India from the general government finances
  2. India’s first Finance Minister, Sir R.K. Shanmugham Chetty, presented the first Finance Budget of independent India on November 26, 1947.

Which of the above statements is/are correct? a) 1 Only b) 2 Only c) Both 1 and 2 d) Neither 1 nor 2

Question 4: Consider the following statements,
  1. Foreign direct investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased.
  2. A foreign institutional investor (FII) is an investor or investment fund registered in a country outside of the one in which it is investing. Institutional investors most notably include hedge funds, insurance companies, pension funds and mutual funds.

Which of the above statements is/are correct? a) 1 Only b) 2 Only c) Both 1 and 2 d) Neither 1 nor 2

Question 5: Consider the following statements, 
  1. The ‘Annual Financial Statement’, laid before both the Houses of Parliament constitutes the Budget of the Union Government.
  2. Article 265 provides that ‘no tax shall be levied or collected except by authority of law’

Which of the above statements is/are correct? a) 1 Only b) 2 Only c) Both 1 and 2 d) Neither 1 nor 2

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