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21 September, 2019

12 Min Read

GS-II :
An independent fiscal watchdog for Parliament.

GS-II: An independent fiscal watchdog for Parliament.

News

When most people arrive at the ballot box, they vote with their gut. But getting there requires absorbing and shaping months and years of conservation, long held opinions and ideally hard facts and evidence.

What is Parliamentary Budget Office?

  • A PBO is an independent and impartial body linked directly to Parliament.
  • It provides technical and objective analysis of Budgets and public finance to the House and its committees.
  • It can generate quality public debate on Budget policy and public finance, enabling parliamentarians to engage meaningfully in the Budget process.
  • Traditionally, independent budgetary units are more common in developed countries.

What is the need for such office?

Multiple indicators suggest that executive-led budgetary governance has not been successful in India.

The Indian Parliament is a Budget-approving body contributing to budgetary matters in the following notable ways:

  • Presentation of the Budget.
  • Scrutiny of the demands for grants of various ministries.
  • Debate.
  • Consideration and approval of the Budget.
  • To carry out these functions effectively, Parliament requires institutional, analytical and technical competence.
  • There is a growing trend among legislatures, particularly within the OECD countries to establish specialised Budget research units.

What are the functioning roles of PBO?

The majority of PBOs have four core functions:

  1. Independent and objective economic forecast.
  • Budgets generally start with an economic forecast.
  • A PBO can present either its own independent forecast or it can validate the government’s, providing an objective analysis on the official forecast.
  1.  Baseline estimate survey.
  • It will provide options for spending cuts, outlining a budgetary framework that reflects priorities of the nation, bespoke policy briefs.

Analysing the executive’s Budget proposal.

  • A PBO is comprised of independent and specialised staff, such as Budget analysts, economists, and public finance experts.
  • These may include general economic analysis, tax analysis, long-term analysis.

3 . Providing medium- to long-term analysis.

  • Its output, and the methods by which those outputs are prepared, must be transparent, accessible and understandable.

 

 

Source: THE HINDU

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GS-III :
Global Climate Strike movement

GS-I: Global Climate Strike movement.

News

Students in more than 2,000 cities across the world are holding demonstrations under the #FridaysforFuture movement, protesting inaction towards climate change.

The Global Climate Strike movement:

  • The #FridaysforFuture movement, also known as the Youth Strike for Climate Movement was started in August 2018 by Greta Thunberg.
  • She sat outside the Swedish parliament every school day for three weeks to protest against inaction towards climate change and called for concrete government action.
  • Then in September 2018, Thunberg called for a strike every Friday until the Swedish parliament revised its policies towards climate change.
  • Gradually, students and adults from across the world started mobilizing and demonstrating in front of parliaments and local city halls in their respective countries, making global, a local movement.

Who is Greta Thunberg?

  • Thunberg describes herself as a “16-year-old climate activist with Asperger’s”.
  • She says that she first heard about “something called climate change or global warming” when she was eight years old.
  • Since 2018, when she started skipping school, Thunberg has come a long way to become one of the world’s youngest climate change crusaders.
  • She has delivered speeches at the World Economic Forum in Davos, the EU Parliament, COP24, and to the UN Secretary General Antonio Guterres.
  • Earlier this year, she was nominated for the Nobel Peace Prize 2019, the winners of which will be announced in October.

What started the global school student movements?

  • The global school movements began in 2015.
  • A Climate Strike was organised in November 2015, the idea for which came to the organisers at the Global Youth Summit of 2015.
  • Under this strike, students were urged to skip school and join other protestors. The strike was meant to be a “wake-up call” for the young generation.
  • Their demands at that time were to stop the extraction of fossil fuels and to make the transition to 100 per cent clean energy.

Why are students protesting this time?

  • Even though climate change affects everyone, the present generation of youngsters is the ones who are going to be bearing the brunt of it in the coming decades.
  • The sentiments behind these are the “broken promises” of older generations, members of which continue to extract and use fossil fuels, leading to increased CO2 emissions and subsequently, increasing average global temperatures.
  • Distrust of political leaders among the younger generation is also a reason why they feel the need to take things into their own hands.

 

 

Source: Indian Express

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GS-III : Economic Issues Terminology
A Deep Cut

GS-III: A Deep Cut.

News

Tax cuts have enthused Corporate India , but there is the fiscal problem to deal with. Finance Minster announcement of deep cut of corporate taxes and roll back of some market unfriendly proposals in the budget she presented in July.

Corporate Tax Cut:

Finance Minister Sitharaman’s announcement to cut corporate tax rates was a welcome surprise for the Indian economy that has been struggling with growth deceleration.

The government has cut the corporate tax rate for domestic companies to 22 per cent (inclusive of all cesses and surcharges) for domestic companies from the existing 30 per cent.

New tax rate will be applicable from the current fiscal which began on April 1.

The move is a lift for the Modi government who was facing increasing pressure to relight once-stellar economy after five consecutive quarters of slowing growth saw India this year loses its status as the fastest-expanding major economy to China.

Finance Minister announcement:

  • New provision inserted in the income tax act with effect from fiscal year 2019-20, that allows any domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions
  • Manufacturing companies set up after October 1 to get option to pay 15% tax. Effective tax rate for new manufacturing firms to be 17.01% inclusive of surcharge & tax.
  • Listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged
  • Higher surcharge will also not apply on capital gains on sale of security including derivatives held by FPIs
  • Enhanced surcharge will not apply to capital gains arising on equity sale or equity-oriented funds liable to STT stabilise flow of funds into capital markets
  • To provide relief to companies availing of concessions and benefits, a MAT relief by reducing it from 18% to 15%
  • CSR 2% spending to include government, PSU incubators and public funded education entities, IITs.

Benefits:

  • Essentially, a lower corporate tax is aimed at boosting investment by the private sector.
  • The continuing deceleration of the Indian economy was being blamed both on depressed consumption by private individuals and decline in investment by private businesses.
  • The two other factors contributing to growth – government expenditure (where the fiscal deficit is under pressure) and exports (which have been stagnant), both have little space to boost growth.
  • The cut in corporate tax chooses to single out private investment.
  • This is a long-term measure that would make it more attractive for existing and new businesses to invest and increase production will create employment.

 

 

Source: THE HINDU

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GS-III :
Joining RCEP should be seen as an extension of Look East policy.

GS-II: Joining RCEP should be seen as an extension of Look East policy.

Context

RCEP

  • The Regional Comprehensive Economic Partnership (RCEP) aims to bring the 10 countries of ASEAN with Australia, New Zealand, South Korea, India, China and Japan to create the world’s largest trading block.
  • If it comes into being, RCEP will constitute more than 40 per cent of the global population and almost half of world’s economy.
  • It consists of three of the six largest economies of the world, especially, the two fastest growing large economiesIndia and China.
  • Out of the top 16 countries with the largest GDP, six belong to the proposed RCEP.

Act of Balancing with China

  • There is a huge debate in India over joining RCEP. India’s allies in Southeast Asia, as well as Australia, want India to join it to balance China.
  • On the other hand, many in India feel that RCEP will aggravate India’s burgeoning trade deficit with China.
  • The Indian industry feels that China does not provide a level playing field for items that they could export, especially in fields like pharma, IT, films, indigenous medicines, wellness and yoga.
  • Some of these are founded on opacity that surrounds the Chinese government’s decision making.

The Indian protectionism

  • There is a tendency in Indian industry to seek protection, whenever any steps towards globalization are taken.
  • The “Bombay Club” long used for protectionism, protested when liberalisation was introduced and tried to prevent imports for as long as they could.
  • However, it is an acknowledged fact that globalisation did benefit the Indian economy, it brought in newer technology and made Indian industry far more competitive.
  • RCEP does provide Indian industry a huge market to grow and expand, provided it transforms and the government frees it from bureaucratic controls that have been stifling growth.

Not to blame anyone

  • When import access was given to Chinese goods, it did not eliminate Indian industry.
  • Of course, some industries which are uneconomical, have not modernized and imbibed new technologies will fall by the way side.
  • More significantly, opening up markets and reducing tariffs will benefit consumers.
  • The automobile, telecom and even IT boom would not have been feasible without liberalisation.
  • Similarly, the recent spurt in solar power generation is directly a result of the availability of cheap imported solar films.

Visible benefits for joining:

  • India’s presence in this trading block could lead to a large number of multinationals shifting their production facilities from China to India.
  • RCEP being effective would enable them to access Chinese markets, without being present there, to comply with US sanctions.
  • This could also bring in huge investments from many companies in the West.
  • With the Trans-Pacific Partnership having unraveled, it is quite feasible that a post-Trump US administration may join RCEP if it takes off.

A win-win situation

RCEP is one sure shot way of forcing China to provide a level playing field.

India has the largest arable land and one of the largest pool of scientists, engineers, technicians, so there is no reason for India to be concerned.

Way forward

India’s welcome to RCEP is one way of controlling China and keeping it in check.

In a big grouping like this, China is unlikely to have its way, nor is it going to antagonize everyone.

India’s absences from RCEP will virtually handover this significant grouping to China, which is certainly not in India’s interest.

Thus RCEP is a huge opportunity which India should not miss.

 

Source: Indian Express

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