18 Jul 2024: UPSC Exam Comprehensive News Analysis

18 July 2024 CNA
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A. GS 1 Related
B. GS 2 Related
POLITY
1. Karnataka halts jobs Bill amid industry uproar
C. GS 3 Related
D. GS 4 Related
E. Editorials
ECONOMY
1. Intergenerational equity as tax devolution criterion
2. Choosing the right track to cut post-harvest losses
F. Prelims Facts
1. 12 Naxals killed in gunfight with police in Gadchiroli
2. WTO pact worries small fisher bodies
G. UPSC Prelims Practice Questions
H. UPSC Mains Practice Questions

C. GS 3 Related

Nothing here for today!!!

Syllabus: GS-3, India’s fiscal federalism

Mains: Issues with Distribution of  taxes in India

Context:​ The distribution of union tax revenue to States is a crucial aspect of India’s fiscal federalism. The Finance Commission (FC) formulates this distribution every five years, often prioritizing intragenerational equity, which focuses on redistributing tax revenue among States. However, this approach can exacerbate intergenerational inequity, necessitating a reevaluation to include intergenerational equity as a criterion in tax devolution.

Intergenerational Fiscal Equity:

• Definition: Ensuring equal opportunities and outcomes for every generation by preventing the current generation’s financial decisions from burdening future generations.
• Public Finance Perspective: Achieved when each generation pays for the public services it consumes without resorting to excessive borrowing that future generations must repay.

Current Fiscal Scenario:

• Revenue Generation: Governments can raise revenue through taxes or borrowing.
• Borrowing Impact: Financing current expenditures through borrowing shifts the repayment burden to future generations, leading to intergenerational inequity.

Ricardian Equivalence Theory:

• Theory: Suggests that households save more when the government borrows, anticipating higher future taxes, thus stabilizing aggregate demand.
• Indian Context: High-income States often pay more taxes than they receive in services, while low-income States receive higher financial transfers, leading to fiscal imbalances and borrowing disparities.

Intragenerational Equity:

• High-Income vs. Low-Income States:
• High-income States (e.g., Tamil Nadu, Karnataka) finance a larger share of their expenditure through their own taxes and receive less from the Union.
• Low-income States (e.g., Bihar, Uttar Pradesh) rely more on Union transfers and finance a smaller portion of their expenditure through local taxes.

Issues

• Fiscal Imbalance: High-income States face higher deficits due to lower Union transfers and higher local tax contributions.
• Borrowing Burden: Disproportionate borrowing by high-income States to meet their expenditures, leading to potential breaches of Fiscal Responsibility Acts.
• Equity vs. Efficiency: Current distribution formulas prioritize equity (population, area) over efficiency (tax effort, fiscal discipline).

Significance

• Economic Stability: Incorporating intergenerational equity ensures sustainable fiscal policies, reducing future debt burdens and promoting long-term economic stability.
• Fairness: Balancing intragenerational and intergenerational equity ensures fair distribution of resources and services, aligning with the principle of equal opportunity for all generations.
• Fiscal Responsibility: Encouraging States to maintain fiscal discipline and efficient expenditure through appropriate incentives can lead to more prudent financial management.

Solutions

• Revise Distribution Formula: Include more fiscal indicators such as tax effort and expenditure efficiency to incentivize better fiscal behavior.
• Weighted Indicators: Assign larger weights to fiscal discipline and tax effort in the devolution formula to reward efficient States.
• Incentivize Fiscal Responsibility: Provide larger Union financial transfers to States demonstrating fiscal responsibility, ensuring sustainable debt management.

Nut Graf: Incorporating intergenerational equity into the tax devolution criterion is essential for promoting sustainable fiscal policies and ensuring that future generations are not unduly burdened by current financial decisions. By balancing equity and efficiency, the Finance Commission can create a fairer and more effective distribution formula that supports both present and future generations.

2. Choosing the right track to cut post-harvest losses

F. Prelims Facts

1. 12 Naxals killed in gunfight with police in Gadchiroli

Context: A major encounter between security forces and Naxalites took place in Gadchiroli district of Maharashtra, resulting in the death of twelve Naxalites, including women. The operation saw injuries to security personnel and the recovery of multiple automatic weapons.

Operation Details:

• Location: Maoist camp near Wandoli village, close to the Chhattisgarh border.
• Time: Launched around 10 a.m. and continued past sunset.
• Units Involved: Seven units of C60 commando force.
• Intelligence: Based on credible information indicating the presence of 12 to 15 Naxalites.

Casualties and Injuries:

• Naxalites: 12 killed, including DVCM Laxman Atram (Vishal Atram), who oversaw the Tipagad Dalam.
• Security Personnel: One sub-inspector and one jawan sustained bullet injuries, both are out of danger and have been evacuated for medical treatment.

Weapons Recovered:

• Three AK-47 rifles.
• Two INSAS rifles.
• One carbine.
• One SLR.

Reward Announcement:

• Deputy Chief Minister Devendra Fadnavis announced a cash reward of ₹51 lakh for the C60 commandos and district police.

Significance

Impact on Naxal Movement:

• Leadership Loss: The death of DVCM Laxman Atram is a significant blow to the Naxalite leadership in the region.
• Operational Setback: The recovery of automatic weapons and elimination of Naxal cadres disrupts their operational capabilities.

Security Forces Morale:

• Recognition: The cash reward boosts the morale of the security personnel, recognizing their bravery and effectiveness.
• Medical Care: Prompt medical evacuation and treatment of injured personnel demonstrate the commitment to their welfare.

Local and National Security:

• Enhanced Security: Successful operations enhance the overall security environment in Naxal-affected areas.
• Public Confidence: Such operations reinforce public confidence in the government’s ability to tackle Naxalite threats.

2. WTO pact worries small fisher bodies

Context: Small-scale fisher organizations from India, Bangladesh, Ecuador, Gambia, and Indonesia have raised concerns over the World Trade Organization (WTO) negotiations on curbing overcapacity and overfishing (OCOF) subsidies. They argue that the comprehensive agreement, once concluded, could have detrimental effects on their livelihoods and the future of indigenous communities worldwide.

Concerns Raised by Small Fisher Bodies:

• Special and Differential Treatment: The limited provisions for special and differential treatment in the draft agreement are inadequate for protecting small-scale fishers in developing countries.
• National Determination and Definitions: Although the exempted category will be determined nationally, there are challenges in defining activities that exclude small-scale fishers, posing risks of misclassification and potential harm.

Demands and Recommendations:

• Removal from WTO Jurisdiction: Small-scale fisher organizations demand that subsidy negotiations be removed from the WTO framework.
• Alternative Platform: They propose that negotiations be transferred to the Committee of Fisheries under the Food and Agriculture Organisation (FAO)’s Sub-Committee on Trade, which is better equipped to handle fisheries policy and small-scale fishers’ issues.

Statements from International Organizations:

• World Forum of Fisher Peoples and World Forum of Fish Harvesters and Fish Workers: These organizations, representing traditional small-scale fishing communities globally, emphasize that while some exemptions are agreed upon, the definitions and scope need clear articulation to avoid adverse impacts on small-scale fishers.

Significance

Impact on Small-Scale Fishers:

• Livelihoods and Sustainability: The agreement could undermine the sustainability and livelihoods of small-scale fishers who rely heavily on subsidies to maintain their operations.
• Indigenous Communities: Indigenous fishing communities could face severe disruptions, threatening their traditional way of life and economic stability.

Broader Implications:

• Global Fisheries Management: The debate highlights the need for more inclusive and nuanced approaches in global fisheries management, recognizing the unique needs and contributions of small-scale fishers.
• Policy Expertise: Involving the FAO’s Sub-Committee on Trade could bring more specialized expertise to the negotiations, ensuring that policies are well-informed and equitable.

H. UPSC Prelims Practice Questions

Q1. With reference to India, Didwana, Kuchaman, Sargol and Khatu are the names 
of (PYQ 2021)

1. Glaciers
2. Mangrove areas
3. Ramsar sites
4. Saline lakes

CHECK ANSWERS:-

Answer: d

Explanation:

• Didwana, Kuchaman, Sargol and Khatu are saline lakes of Rajasthan.
• Didwana, Kuchaman, the Sargol and the Khatu lakes are playas.
  • Playas are small lakes with flat floors and undrained basins in which water collects after rains and evaporates quickly.

Q2. Consider the following statements: (PYQ 2022)

1. In India, credit rating agencies are regulated by Reserve bank of India.
2. The rating agency popularly known as ICRA is a public limited company.
3. Brickwork Ratings is an Indian credit rating agency.

Which of the statements given above 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: b

Explanation:

• Statement 1 is not correct, In India, credit rating agencies are regulated by the Securities and Exchange Board of India (SEBI)
• Statement 2 is correct, ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange.
  • ICRA was set up in 1991 by leading investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
• Statement 3 is correct, Brickwork Ratings (BWR) is a SEBI-registered Indian Credit Rating Agency.

Q3. Consider the following statements: (PYQ 2019)

1. Asiatic Lion is naturally found in India only.
2. Double-humped camel is naturally found in India only.
3. One-horned rhinoceros is naturally found in India only.

Which of the statements given above is/are correct?

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

CHECK ANSWERS:-

Answer: a

Q4. With reference to the Indus river system of the following four rivers, three 
of them pour into one of them, which joins the Indus direct. Among the following, 
which one is such river that joins the Indus direct? (PYQ 2021)

Q5. The term ‘West Texas Intermediate’ sometimes found in news, refers to a 
grade of (PYQ 2020)

I. UPSC Mains Practice Questions

1. Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (UPSC 2021) (10 marks, 150 words) [GS-3, Economy]
2. It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement. (UPSC 2019) (15 marks, 250 words) [GS-3, Economy]

Read the previous CNA here.