04 Feb 2022: UPSC Exam Comprehensive News Analysis

A. GS 1 Related
B. GS 2 Related
C. GS 3 Related
ECONOMY
1. The need to boost labour income and consumption expenditure
D. GS 4 Related
E. Editorials
INTERNATIONAL RELATIONS
1. A border move that will only bolster China
GOVERNANCE
1. The curious case of Meghalaya’s COVID-19 relief package
ECONOMY
1. A disjointed response
F. Prelims Facts
1. Celebrating 100 years of Bhimsen Joshi
2. Chandrayaan-3 set for launch in August
G. Tidbits
1. Accidental deaths
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

A. GS 1 Related

Nothing here for today!!!

B. GS 2 Related

Nothing here for today!!!

C. GS 3 Related

Category: ECONOMY

1. The need to boost labour income and consumption expenditure

Syllabus: Government Budgeting

Prelims: Important macroeconomic indicators of the Indian economy – values and trends

Mains: Critical analysis of the fiscal consolidation approach envisaged under the recent budget

Economic context of the recent budget:

• The Annual budget 2022-2023 was placed in the midst of the following challenges.

Sharp reduction in output growth rate following the pandemic:

• The Indian economy faced a record economic contraction in the first year of the pandemic (2020-21 fiscal year).
• Though India’s GDP is expected to grow by 9.2% in 2021-22 and 8% to 8.5% in 2022-23, these estimates suggest a recovery above the pre-pandemic level of 2019-20 by a meagre 1.3% only.

Concerns over the fiscal deficit numbers:

• The fiscal stimulus during the pandemic and the lower revenue realization resulted in the fiscal deficit numbers reaching as high as 9.2% in the 2020-21 fiscal year.
• This marks a large deviation from the fiscal consolidation envisaged under the Fiscal Responsibility and Budget Management Act.

Reduction in labour income and consumption expenditure:

• While every economic crisis involves a sharp reduction in output growth rate, a specific problem in India was the sharp reduction in labour income even as industrial profits have increased.
• The reduction in the income share of labour has resulted in a sharp fall in both the absolute value of consumption expenditure as well as the consumption-GDP ratio.
• Despite signs of economic recovery in India, the real consumption expenditure remains lower as compared to 2019-20.

Structural challenges:

• Though the present challenges in the Indian economy can be mainly attributed to the disruption caused by the pandemic, notably however the pandemic in itself was preceded by perhaps the longest episode of a growth slowdown in the Indian economy since the liberalisation period.
• Several economists have attributed this to the structural constraints of the Indian economy.

Fiscal Deficit projections in current Budget:

• The Union Budget for 2022-23 has projected a fiscal deficit of 6.4% of nominal GDP.
• This marks a decrease from the 6.9% assumed in the revised estimates for the current fiscal year (2021-22) ending on March 31.
• This move is consistent with the broad path of fiscal consolidation envisaged in the last budget which set out the target of reaching a fiscal deficit level below 4.5% by 2025-26 while also considering the need to nurture growth, through public investment, to ensure sustainable economic recovery in the post-pandemic phase.

Key shortcomings of the Budget:

Impact on revenue expenditure:

• Given that the share of revenue and non-debt receipts in GDP has remained more or less unchanged, fiscal consolidation would then be possible only by reducing the expenditure-GDP ratio.
• The brunt of this expenditure compression is likely to be mostly on revenue expenditure.

Implications for development spending:

• The brunt of expenditure compression has fallen on development expenditure. The fiscal consolidation strategy carried out in the last few years has led the development expenditure ratio to slide downward.
  • Development expenditure is calculated as the sum of expenditures on social services and economic services.

Impact on income and livelihood:

• The reduction in the allocation for development expenditure ratio for 2022-23 reflects a reduction in the allocation for food subsidies, national rural employment guarantee program, expenditure in agriculture, rural development and social sector.

• The reduced expenditure in the rural employment programme and employment-intensive sectors like the agricultural sector would have a marked impact on the income levels of the general populace.
• Expenditure compression has been often associated with the overall fall in the allocation for total social sector expenditure.
  • Example: The total nominal expenditure on medical and public health has registered a fall in 2022-23 as compared to 2021-22.
• Thus the reduction in the allocation for revenue expenditure would be associated with a fall in several key expenditures that affect the income and livelihood of labour.

Macro-economic perspective:

• The reduction in the allocation for development expenditure would have an adverse impact on labour income and consumption expenditure. This could curtail the aggregate demand in the economy and depress the consumption expenditure which is so very critical for the Indian economy especially for the recovery process.
• Thus the Budget’s fiscal consolidation approach could be a cause of concern from the macro-economic perspective of India.

Heavy reliance on the external sector:

• The budget approach signifies a heavy dependency on external demand for economic revival.
• Despite the limited recovery in exports in the last few quarters, the possibility of sustained economic recovery relying exclusively on the export channel appears to be bleak at the present as different countries have already started pursuing fiscal consolidation.

Neglect of corporate tax as a revenue source:

• Despite a sharp increase in profits during the pandemic, the corporate tax-GDP ratio has continued to remain below the 2018-19 level due to tax concessions. This restricts revenue receipts.
• Despite the objective of fiscal consolidation, the corporate tax ratio continues to remain low.

D. GS 4 Related

Nothing here for today!!!

E. Editorials

Category: INTERNATIONAL RELATIONS

1. A border move that will only bolster China

Syllabus: India and its neighbourhood – relations

Prelims: Depsang Plains and other places in the news with respect to the India-China border standoff.

Mains: Significance of Depsang and the impact of delinking it from ongoing the crisis

Context

Depsang has been ruled out by the Army Chief as a “friction point” in the ongoing border crisis in Ladakh.

Depsang

• Depsang is an enclave of flat terrain located in an area the Army classifies as Sub-Sector North (SSN), which provides land access to Central Asia through the Karakoram Pass.
• It is a few km southeast of the important airstrip of Daulat Beg Oldi (DBO).
  • The Chinese army has blocked Indian patrols since 2020 at a place called Y-junction or Bottleneck.
• A joint patrol of the ITBP and Army takes place at the areas near Y-Junction once a month.
• The Y-junction is 18 km on the Indian side of the Line of Actual Control, even though the Chinese claim line lies another 5 km further west, to the east of Burtse town.
• Satellite imagery from November 2021 confirms Chinese deployments at the Y-junction.

Delinking Depsang

• In a television interview, the Indian Army Chief said that “out of the five or six friction points (in Ladakh), five have been solved”.
• These ‘friction points’ are Depsang, Galwan, Hot Springs, Gogra, North bank of Pangong Tso, Kailash Range and Demchok.
• The general was referring to Hot Springs while asserting that only one of the friction points remained to be resolved.
  • This implicitly ruled out Depsang as an area to be resolved.
• The attempt to delink the important area of Depsang from the ongoing crisis is worrying and has long-term strategic consequences for India.

Significance of Depsang

• Depsang plains are one of the most vulnerable regions for the Indian Army in Ladakh.
• Sub-Sector North’s (SSN) flat terrain of Depsang, Trig Heights and DBO provides direct access to Aksai Chin.
• The region is suited for mechanised warfare but is located at the end of one very long and tenuous communication axis for India.
  • However, China has multiple roads that provide easy access to the area.
  • This leaves SSN highly vulnerable to capture by the PLA, with thousands of km at stake.
• SSN lies to the east of Siachen, located between the Saltoro ridge on the Pakistani border and the Saser ridge close to the Chinese border.
  • Technically, it is the only place for a physical military collusion between Pakistan and China and poses the challenges of a two-front war.
  • If India loses this area, it will be difficult to launch military operations in the Gilgit-Baltistan region to counter Pakistan.
• Depsang is also seen as a launchpad for a military offensive by India in Aksai Chin.

Implications of delinking Depsang

• The danger of delinking Depsang from the current border crisis is of certifying the Chinese argument, which overrules the Indian claim over the territory.
• In low populated areas like Ladakh, with limited forward deployments, regular patrolling is the only assertion of territorial claims.
• By arguing that the blockade at Y-junction precedes the current stand-off and that goes back years, the Chinese can affirm that Indian patrols never happened in this area and thus India has no valid claim on the territory.
  • With the disadvantage of being a lesser power compared to China, the argument further weakens India in negotiations.
• As demonstrated by China post the 1962 War, there should be no holding back in asserting one’s claims when it comes to safeguarding the territory.
  • Denial of truth for political gains, in this case, will be detrimental to India’s strategic interests.

F. Prelims Facts

1. Celebrating 100 years of Bhimsen Joshi

Context:

• 100th birth anniversary of Pandit Bhimsen Joshi.

Pandit Bhimsen Joshi:

• Bhimsen Joshi was one of the greatest Indian vocalists from Karnataka, in the Hindustani classical tradition.
• He is known for the Khayal form of singing and belongs to the Kirana Gharana tradition of Hindustani Classical Music.
• Pandit Bhimsen Joshi has been awarded the Sangeet Natak Akademi Fellowship. He also received the Bharat Ratna award in 2009.

2. Chandrayaan-3 set for launch in August

• India plans to execute the Chandrayaan-3 mission in August 2022.
• The Chandrayaan-3 mission is a follow-up of Chandrayaan-2 of July 2019.
  • The Chandrayaan-2 mission aimed to land a rover (Pragyaan) on the lunar South Pole. It was sent aboard the country’s most powerful geosynchronous launch vehicle, the GSLV-Mk 3. However, lander Vikram, instead of a controlled landing, ended up crash-landing.
  • Had the Chandrayaan-2 mission been successful, it would have been the first time a country landed its rover on the moon in its maiden attempt.

H. UPSC Prelims Practice Questions

Q1. When a Bill is reserved by a Governor for the consideration of the President, what is the 
time limit prescribed by the constitution for returning the bill?

1. Six Weeks
2. Three Months
3. Six Months
4. No time limit

CHECK ANSWERS:-

Answer: d

Explanation:

• Article 201 of the Indian Constitution allows the Governor to reserve bills for the consideration of the President.
• Notably, the time limit within which the President has to make a decision with regard to such a reserved bill is not mentioned in the Constitution.

Q2. With respect to River Cities Alliance (RCA), which of the following statements is/are 
correct?

1. It was launched by the Ministry of Jal Shakti and the Ministry of Environment, Forest and Climate Change.
2. The Alliance is open to all river cities of India. Any river city can join the Alliance at any time.

Options:

1. 1 only
2. 2 only
3. Both
4. None

CHECK ANSWERS:-

Answer: b

Explanation:

• The Ministry of Jal Shakti along with the Ministry of Housing and Urban Affairs launched the River Cities Alliance (RCA).
• The River Cities Alliance (RCA) has been launched with the objective to provide the member cities with a platform to discuss and exchange information on aspects that are vital for sustainable management of urban rivers, sharing best practices and supporting innovation.
• RCA is envisaged as a facilitatory platform for initiating river-sensitive planning and development. As cities start to implement the river-sensitive development agenda, the River Cities Alliance will support them to learn from each other and inspire others to take up progressive action on this front.
• The Alliance is open to all river cities of India. Any river city can join the Alliance at any time.

Q3. Which of the following statements is/are incorrect with respect to National Adaptation 
Fund for Climate Change?

1. It is a Centrally Sponsored Scheme which was set up in the year 2015-16.
2. National Bank for Agriculture and Rural Development (NABARD) is the National Implementing Entity (NIE).

Options:

1. 1 only
2. 2 only
3. Both
4. None

CHECK ANSWERS:-

Answer: a

Explanation:

• The National Adaptation Fund for Climate Change (NAFCC) is a Central Sector Scheme that was set up in the year 2015-16.
• The overall aim of NAFCC is to support concrete adaptation activities which mitigate the adverse effects of climate change. The activities under this scheme are implemented in a project mode.
• National Bank for Agriculture and Rural Development (NABARD) is the National Implementing Entity (NIE).

Q4. Consider the following statements with respect to cartelization:

1. The Competition Commission is responsible for enforcing the cartel laws in India.
2. Prices controlled by the government under a law is not cartelization.
3. Both companies and individuals can be prosecuted under the Competition Act.

Which of the above statements is/are correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

CHECK ANSWERS:-

Answer: d

Explanation:

• “Cartel” includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services;
  • directly or indirectly determining purchase or sale prices;
  • limiting or controlling production, supply, markets, technical development, investment or provision of services;
  • sharing the market or source of production or provision of services by way of allocation of geographical areas of the market, types of goods or services or number of customers in the market, or in any other similar way; or
  • directly or indirectly resulting in bid-rigging or collusive bidding.
• Prices controlled by the government under a law is not cartelization.
• The Competition Commission is responsible for enforcing the cartel laws in India. Both companies and individuals can be prosecuted under the Competition Act.

Q5. With reference to the water on the planet Earth, consider the following statements:

1. The amount of water in the rivers and lakes is more than the amount of groundwater.
2. The amount of water in polar ice caps and glaciers is more than the amount of groundwater.

Which of the statements given above is/are correct? [UPSC 2021]

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

CHECK ANSWERS:-

Answer: b

Explanation:

• The amount of water in the rivers and lakes is less than the amount of groundwater.
• The amount of water in polar ice caps and glaciers is more than the amount of groundwater.

I. UPSC Mains Practice Questions

1. Considering the recent spate of incidents at the border, is India right in announcing a diplomatic boycott of the Winter Olympics to be held in China? (250 words; 15 marks)[GS-2, International Relations]
2. Describe the short term and long term consequences of increased consumption expenditure on the Indian Economy. (250 words; 15 marks)[GS-3, Economy]