08 Nov 2023: UPSC Exam Comprehensive News Analysis

B. GS 2 Related

Category: SOCIAL JUSTICE

1. The problem with the ‘70 hours a week’ line

Syllabus: Welfare Schemes for Vulnerable Sections, Issues Relating to Development & Management of Social Sector/Services, Issues Relating to Poverty & Hunger.

Mains: Implications of a proposed 70-hour working week and its connection to international labour standards, trade agreements, and supply chain regulations.

Context

N.R. Narayana Murthy, co-founder of Infosys, suggested that Indian youngsters should work 70 hours a week to enhance the country’s competitiveness, a proposal that has drawn support from some in the Indian business community.

Introduction

• Mr Murthy recently suggested that Indian youngsters should work 70 hours a week to make the country more competitive.
• This suggestion has garnered support from some in the Indian business community, but the article argues that it is flawed on several counts.

Flawed Arguments by Narayana Murthy (according to the author)

1. Misinterpretation of Working Hours in Advanced Countries

• Narayana Murthy incorrectly claimed that extended working hours have helped advanced countries like Germany and Japan succeed.
• In reality, advanced countries have seen a continuous decline in working hours per worker over the past 150 years.
• As countries become more productive, working hours tend to decrease, allowing people more leisure time.

2. Burdening Workers for Increased Productivity

• Narayana Murthy’s argument places the burden of increasing productivity on the shoulders of workers, while the real issue lies in underinvestment in innovation.
• Productivity depends on the strength of a country’s innovation system, and India lags in research and development spending.
• Private sector contributions to R&D in India are significantly lower compared to countries with stronger innovation systems.

3. Violation of International Labour Standards (ILS)

• Narayana Murthy’s proposal for a 70-hour workweek violates international labour standards (ILS), including the International Labour Organization’s (ILO) Decent Work Agenda.
• Non-adherence to ILS can impact the Indian industry’s aspirations to expand globally as advanced countries are insisting on including ILS in bilateral free trade agreements (FTAs).
• FTAs with the European Union and the United Kingdom include clauses on promoting “decent working conditions” and respecting ILO’s Fundamental Conventions.

The Importance of ILS

• ILS is becoming crucial for market access in advanced countries and for participating in global supply chains.
• FTAs and international agreements increasingly emphasise labour rights, working conditions, and social protection in supply chains.
• Developed countries are enacting regulations like “Supply Chain Due Diligence” that obligate companies to address human rights violations, labour exploitation, and environmental degradation in their supply chains.
• Indian companies should prioritise labour rights and adhere to ILS to participate in global supply chains and remain competitive.

Nut Graf: This opinion piece challenges Narayana Murthy’s call for 70-hour workweeks, highlighting flaws in his arguments. It emphasises the importance of international labour standards, the reduction of working hours in advanced countries, and the need for India Inc. to prioritise labour rights for global market access.

E. Editorials

Category: INDIAN ECONOMY

1. A verdict that hampers international law obligations

Syllabus: GS-3, Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Prelims: Double taxation avoidance agreement, Most-Favored Nation, Organization for Economic Co-operation and Development, Section 90 of the Income-Tax Act

Mains: Tax uncertainty as a major challenge to foreign investment in India

Context

• A major challenge for foreign investors in India is uncertainty in taxation measures.
• A recent judgment by the Supreme Court of India in the Assessing Officer Circle (International Taxation) New Delhi vs M/s Nestle SA case highlights this issue.

What is the case? 

• The case involves corporations like Nestle (a Swiss multinational company) and Steria (a European company).
• India has double taxation avoidance agreements (DTAAs) with several countries, including the Netherlands, France, Switzerland, Slovenia, Colombia, and Lithuania.
• The DTAAs with the Netherlands, France, and Switzerland require a 10% withholding tax on dividends paid by Indian entities to residents of those countries.
• These DTAAs also contain a most-favoured-nation (MFN) provision, which means that if India gives preferential tax treatment to any other country that is a member of the Organization for Economic Co-operation and Development (OECD), it must also give the same treatment to the Netherlands, France, and Switzerland.
• The DTAAs with Slovenia, Colombia, and Lithuania have a lower withholding tax requirement of 5%.
• When India signed the DTAAs with these countries, they were not members of the OECD, but they joined later.
• The Delhi High Court initially ruled that the preferential tax treatment given to Slovenia under its DTAA with India should also apply to the India-Netherlands DTAA due to the MFN provision.
• However, the Supreme Court overruled this decision, stating that since Slovenia was not an OECD member when the India-Netherlands DTAA was signed, the benefits given to Slovenia do not apply to the India-Netherlands DTAA.
• This ruling will result in a tax burden of approximately ₹11,000 crore on foreign investors and may lead to the reopening of past cases.
• A key question in the case was whether the Most Favoured Nation (MFN) clause in tax treaties like Double Taxation Avoidance Agreements (DTTAs) can be applied in India without notification under Section 90 of the Income-Tax Act.
• This section allows India to sign tax treaties with other countries to avoid double taxation.

Critical Analysis of the Judgement

• The Supreme Court’s decision freezes the provisions of the treaty and doesn’t take into account that one of the reasons for the MFN provision was to make sure that any advantages given to a country in the future would automatically be shared with the other countries that signed the treaty.
• The Supreme Court ruled that the government must issue a notification under Section 90(1) of the Income Tax Act to give effect to the Most Favoured Nation (MFN) provision in Double Taxation Avoidance Agreements (DTAAs).
• The court’s decision was based on the idea of dualism, which states that international law isn’t automatically part of a country’s laws unless the government passes laws to make it so. 
• However, the court has sometimes used a different approach called monism, which says that international law can be part of a country’s legal system even if it hasn’t been specifically included, as long as it doesn’t go against national laws. 
• Critics are worried that this decision goes backwards from the progress made in earlier cases, like PUCL vs India, Vishakha vs State of Rajasthan, and Puttaswamy vs Union of India, where the court recognized the importance of international law in protecting citizens’ rights.
• The court’s interpretation also allows the executive to undermine India’s international law obligations by not issuing the relevant notifications domestically, making India vulnerable to international claims under other instruments of international law.

Way Forward

• The government should clarify the uncertainty surrounding the taxation measures for foreign investors, particularly with regard to the application of the MFN provision in DTAAs. 
• India should review and amend its DTAAs with various countries to ensure that they are fair and equitable for all parties involved. 
• Dispute resolution mechanisms should be strengthened to address conflicts arising from taxation measures and prevent judicial uncertainty. 

Nut Graf: The Supreme Court of India’s ruling in the Nestle SA case highlights the uncertainty in taxation measures for foreign investors in India. The court ruled that the MFN provision in DTAAs cannot be applied without notification under Section 90 of the Income Tax Act. This decision goes against the idea of automatic application of international law and may lead to international claims against India. The government should clarify the uncertainty surrounding the taxation measures for foreign investors and review its DTAAs to ensure fairness and equity.

F. Prelims Facts

1. Understanding the fundamentals of how electricity is transmitted

Syllabus: GS 3- Science & Technology

Prelims: Fundamentals of how electricity is transmitted

Introduction

• In 1954, India’s first Prime Minister Jawaharlal Nehru referred to dams as “the temples of modern India,” emphasising the importance of power transmission and generation in the country’s development.
• The transmission of electric power is a complex process involving multiple factors, such as voltage, impedance, and frequency.
• Power transmission consists of three components: generation, transmission, and distribution, each serving a crucial role in the energy supply chain.

Basics of Transmitting Electricity

• Lower current and higher voltage result in higher transmission efficiency in any conductor carrying electric current.
• Transformers are used to increase voltage and reduce current, minimising energy loss during transmission.
• The thickness of transmission cables affects energy loss, with thicker cables reducing loss at a higher cost.
• Longer transmission distances lower transmission costs, allowing power to be transported over greater distances.

AC Power Transmission

• Electric power is commonly transmitted as three-phase alternating current (AC).
• AC voltage changes polarity, allowing for the control and distribution of power to various applications.
• In a three-phase AC circuit, there are three wires, each transmitting AC current in a different phase.
• These phases are distributed to consumers, who can access power for their appliances designed to use AC.

Power Transmission Process

• Power generation facilities produce electricity that is transmitted through a network of transformers, substations, and cables.
• Transmission towers and cables carry high-voltage power over long distances.
• Insulators, circuit-breakers, grounding, and arresters are used to ensure safe and stable transmission.
• Substations serve different functions, such as collecting power, modifying AC frequency, and stepping down voltage for distribution.

Grid Operation

• A national grid includes generation, transmission, and distribution components, and each must account for the specifics of power production and consumption.
• Grids have storage facilities to manage surplus power and provide energy during deficits.
• They also connect to sources that can respond to changes in demand and have automated systems for load management.
• Grids work to prevent failures in one part from affecting others, control AC frequency, and maintain a power factor.

Wide-Area Synchronous Grids

• A wide-area synchronous grid occurs when all connected generators produce AC current at the same frequency.
• India’s national grid is an example of this type of grid, promoting cost efficiency but requiring measures to prevent cascading failures.

G. Tidbits

1. WHO Global TB report

Introduction

• The recently released WHO Global TB Report for 2022 shows a significant global recovery in the number of people diagnosed with tuberculosis (TB) and treated after two years of COVID-19-related disruptions.
• Despite this recovery, TB remains the world’s second leading cause of death from a single infectious agent, and global TB targets have either been missed or are off track.

Key Findings

• In 2022, the reported global number of people newly diagnosed with TB was 7.5 million, the highest number since WHO began global TB monitoring in 1995.
• This number exceeded the pre-COVID baseline of 7.1 million in 2019 and was up from 5.8 million in 2020 and 6.4 million in 2021.
• The 2022 number likely includes a backlog of people who developed TB in previous years, with delayed diagnosis and treatment due to COVID-19 disruptions affecting healthcare access and services.

Regional Recovery

• Countries like India, Indonesia, and the Philippines, which accounted for nearly 60% of the reduction in the number of people newly diagnosed with TB in 2020 and 2021, recovered to levels above those of 2019 in 2022.
• TB caused an estimated 1.30 million deaths in 2022, returning to levels similar to 2019.
• COVID-19-related disruptions are estimated to have resulted in nearly half a million excess TB-related deaths in the three years from 2020 to 2022.

Global Targets and Progress

• Despite the recovery, the net reduction in TB cases from 2015 to 2022 was only 8.7%, far from the WHO End TB Strategy milestone of a 50% reduction by 2025.
• Global TB targets have been missed or remain off track, indicating the challenges in combating the disease.