Daily Current Affairs : 1st June 2022

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Daily Current Affairs for UPSC CSE

Topics Covered

  1. GST Compensation
  2. Indus Water Treaty
  3. GDP Data
  4. Gallantry Awards
  5. Facts for Prelims
  6. River System of the Day – Facts for Prelims

1 . GST Compensation

Context : The Centre paid the entire amount of Goods and Services Tax (GST) compensation due to States up to May 31 by releasing an amount of ₹86,912 crore.

What is GST ?

  • The Goods and Services Tax (GST) is a uniform indirect tax levied on goods and services across the country. GST, as an umbrella tax, replaced central taxes like central excise, service tax, additional duties of excise & customs, special additional duty of customs, besides cesses and surcharges, on supply of goods and services.

Why GST ?

  • Earlier  Central and State Governments leved a large number of taxes such as Central Excise duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry Tax, Local Body Taxes, Octroi, Luxury Tax, etc.  
  • Each of these is an independent tax with separate compliance requirements and differing provisions. This creates complexity and makes it difficult for the taxpayers to adhere to the legal requirements. The different tax systems are also not interconnected, which provides various avenues for tax evasion.
  • To simplify this tax regime, the Goods and Services Tax (GST) wasbe implemented across India from 1st July 2017. 

What is GST Compensation

  • The Constitution (One Hundred and First Amendment) Act, 2016, was the law which created the mechanism for levying a common nationwide Goods and Services Tax (GST).
  • The adoption of GST was made possible by States ceding almost all their powers to impose local-level indirect taxes and agreeing to let the prevailing multiplicity of imposts be subsumed into the GST.
  • While States would receive the SGST (State GST) component of the GST, and a share of the IGST (integrated GST), it was agreed that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund for a period of five years that is currently set to end in June 2022.
  • This corpus in turn is funded through a compensation cess that is levied on so-called ‘demerit’ goods. The computation of the shortfall is done annually by projecting a revenue assumption based on 14% compounded growth from the base year’s (2015-2016) revenue and calculating the difference between that figure and the actual GST collections in that year.

Benefits of GST

  • Elimination of cascading : GST is collected at every stage of value addition and the credit of tax paid at the previous stage will be available to set off the tax to be paid at the next stage of transaction. This will eliminate cascading of taxes. This, in turn lowers the cost of the goods and services for the consumer.
  • Creation of a common national market: GST broadens the tax base, improve compliance through common and uniform procedures and tax-rates, promote make in India and boost our economy.  GST removes inter-state economic barriers, thereby creating a common national market.
  • Easier compliance : Harmonization of laws, procedures and rates of tax at Centre and State level makes compliance easier and simple. In addition to common forms and formats, GST have a common compliance interface through the GSTN portal. The overall outcomes are reduction in compliance costs, alleviation of the need for multiple record keeping and filing returns for multiple taxes, thereby leading to cost saving for the trade and industry.
  • Boost to Make in India : GST will gives a major boost to the Government of India’s ‘Make in India’ initiative by making goods or services produced or provided in India competitive in the national and international markets.
  • Revenue buoyancy: GST brings buoyancy to the Government Revenue by widening the tax base and improving taxpayer compliance. GST improves India’s ranking in the ‘Ease of Doing Business Index’.
  • Technology-driven tax administration: Administration of GST being largely technology driven will not only expedite decision making, but will also usher in a new era of transparency Under GST, the physical interface between the tax payer and tax administration will be greatly reduced as most of the compliance requirements such as registration, filing of returns, payment of taxes, etc. will be performed online.

FACTS FOR PRELIMS

GST Network

The GST Network, a not-for-profit, non-government company promoted jointly  by Central and State Governments provides shared IT infrastructure and services to both Central and State governments and also to the tax payers. It provides a uniform interface for taxpayers across India. A robust IT back-bone which enables capture, processing and exchange information amongst   taxpayers, State & Central governments, Banks, RBI and other stakeholders will greatly smoothen the indirect tax administration and boost compliance.

2 . Indus Water Treaty

Context : Indian and Pakistani negotiators ended another round of talks as part of the Indus Water Treaty on “cordial” terms, said the Ministry of External Affairs (MEA), describing the 118th meeting of the Permanent Indus Commission that took place in Delhi on May 30 and 31.

What is Indus Water Treaty?

  • In the year 1960, India and Pakistan signed a water distribution agreement — came to be known as Indus Water Treaty which was orchestrated by the World Bank.
  • This agreement took nine years of negotiations and divides the control of six rivers between the two nations once signed.
  • Under this treaty, India got control over: Beas, Ravi, Sutlej (Eastern Rivers)
  • Pakistan got control over: Indus, Chenab, Jhelum (Western Rivers)

Why this treaty is important for Pakistan

  • Indus, Chenab and Jhelum are the lifelines of Pakistan as the country is highly dependent on these rivers for its water supply. Since these rivers do not originate from Pakistan but flow to the country through India, Pakistan fears the threat of drought and famine.
  • While Chenab and Jhelum originate from India, Indus originates from China, making its way to Pakistan via India.
  • The treaty clearly spells the do’s and don’ts for both countries; as it allows India to use only 20 per cent of the total water carried by the Indus river.

Permanent Indus Commission

  • The Permanent Indus Commission (PIC) is a bilateral commission consisting of officials from India and Pakistan, created to implement and manage the goals and objectives and outlines of the Indus Waters Treaty (IWT)
  • PIC is the channel of correspondence between the two countries for the purpose of IWT and first step for conflict resolution. If an agreement cannot be reached at the PIC level, the dispute can be referred to a Neutral Expert for the differences already identified in the treaty or referred to the two governments for approaching the Permanent Court of Arbitration (PCA). If the governments too fail to reach an agreement, the Treaty provides an arbitration mechanism. 
  • Under the provisions of the Indus Waters Treaty, signed between India and Pakistan in 1960, the two Commissioners are required to meet at least once every year, alternately in India and Pakistan. 
  • Under the provisions of Article VIII(5) of the Indus Waters Treaty, the Permanent Indus Commission is required to meet regularly at least once a year, alternately in India and Pakistan.

Can India cancel the pact unilaterally?

  • The wording of the treaty has no provision for either country to unilaterally walk out of the pact. Article XII of the IWT says, “The provisions of this Treaty, or, the provisions of this Treaty as modified under the provisions of Paragraph (3), shall continue in force until terminated by a duly ratified treaty concluded for that purpose between the two governments.”
  • This implies that if India wants to go about abrogating it, the country should abide by the 1969 Vienna convention on the law of treaties.

Is India also at the receiving end being at the lower riparian with any other nation? Can such an action lead to violation of International law?

  • There is a concept of upper riparian and lower riparian. Upper riparian is a place where the river originates and lower riparian is where it ends.
  • Under international law, an upper riparian can never stop the flow of water to the lower riparian.
  • The Bramhaputra river too originates in China and flows to India. Such a revocation of treaty can also lead to China consider such a possible measure in the near future where it might cite India’s example of what it possibly did to Pakistan.

3 . Provision National Income Estimates

Context : India’s gross domestic product (GDP) growth slowed to a four-quarter low of 4.1% during the January-March period, from 5.4% in the preceding quarter, as manufacturing output shrank, provisional national income estimates released on Tuesday show. As a result, full-year growth came in at 8.7% — a tad lower than the 8.9% pace projected in February.

About the News

  • India’s gross domestic product (GDP) grew by 8.7% in 2021-22 (or FY22) according to the “provisional estimates” released by the Ministry of Statistics and Programme Implementation on Tuesday.
  • This growth comes at the back of a 6.6% contraction in GDP during 2020-21 when the pandemic led to massive disruptions and widespread lockdowns. The GDP measures the value of all “final” goods and services— those that are bought by the final user— produced in a country in a given period (say a quarter or a year).
  • The data released also showed that the Gross Value Added (or GVA) — another measure of national income — grew by 8.1% in FY22. In FY21, GVA had contracted by 4.8%.

What is GDP and GVA ?

  • While the GDP calculates national income by adding up all expenditures in the economy, the GVA calculates the national income from the supply side by looking at the value added in each sector of the economy.
  • The two measures of national income are linked as follows:
    • GDP = GVA + Taxes earned by the government — Subsidies provided by the government
  • As such, if the government earned more from taxes than it spent on subsidies, GDP will be higher than GVA. If, on the other hand, if the government provided subsidies in excess of its tax revenues, the absolute level of GVA would be higher than that of GDP.
  • GDP provides the demand side of the economy, and GVA the supply side.

Key Takeaways

  • It is a matter of relief that India’s economy has, at least on aggregate parameters, gone past pre-Covid levels. However, this recovery is neither uniform nor broad-based, and has created its own set of winners and losers.
  • This so-called “K-shaped” recovery — or growing inequality in the economy. It shows that even though at the aggregate level both GDP (national income) and PFCE (expenditure) have crossed the pre-Covid level, the average Indian hasn’t yet recovered.
  • The second point to remember is that this is a “recovery” only when compared to the pre-Covid level — and not to what would be the pre-Covid growth trajectory. According to the RBI, getting back to the pre-Covid trajectory will take India up to 2034-35 and that too is preconditioned on an annual economic growth rate of 7.5%.
  • Lastly, when it comes to future growth, the outlook is sobering. Growing geopolitical uncertainties, rising crude oil prices (and inflation), tightening of monetary conditions (higher interest rates) etc. are likely to dampen the anaemic growth private consumption demand and thus rein in growth prospects in the current (FY23) and the coming (FY24) fiscals.

Facts for Prelims

K Shaped Recovery

A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”

4 . Gallantry Awards

Context : Jammu and Kashmir Police constable Altaf Hussain Bhat and Group Captain Varun Singh of the India Air Force (IAF) were posthumously awarded the Kirti Chakra and the Shaurya Chakra posthumously by President Ram Nath Kovind on Tuesday.

Wartime gallantry awards

  • Param Vir Chakra — Highest military award, equivalent to the Victoria Cross (which was replaced once India gained its independence).
  • Maha Vir Chakra – Maha Vir Chakra is the second highest military decoration in India and is awarded for acts of conspicuous gallantry in the presence of the enemy, whether on land, at sea or in the air.
  • Vir Chakra – Third in precedence in the awards for wartime gallantry.

Peacetime gallantry awards

  • Ashok Chakra Award – An Indian military decoration awarded for valour, courageous action or self-sacrifice away from the battlefield. It is the peacetime equivalent of the Param Vir Chakra.
  • Kirti Chakra – Second in order of precedence of peacetime gallantry awards.
  • Shaurya Chakra – Third in order of precedence of peacetime gallantry awards.

5 . Facts for Prelims

Prelims Facts about Aadhaar

  • The Aadhaar (Targeted Delivery of Financial and Other Subsidies Benefits and Services) Act, 2016 makes it clear that Aadhaar authentication is necessary for availing subsidies, benefits and services that are financed from the Consolidated Fund of India. In the absence of Aadhaar, the individual is to be offered an alternate and viable means of identification to ensure she/he is not deprived of the same. 
  • Aadhaar has been described as a preferred KYC (Know Your Customer) document but not mandatory for opening bank accounts, acquiring a new SIM or school admissions.  
  • Aadhaar Act forbids sharing Core Biometric Information (such as finger print, iris scan, among other biometric attributes) for any purpose other than Aadhaar number generation and authentication. 
  • The Act makes it clear that confidentiality needs to be maintained and the authenticated information cannot be used for anything other than the specified purpose.
  • No Aadhaar number (or enclosed personal information) collected from the holder can be published, displayed or posted publicly. Identity information or authentication records would only be liable to be produced pursuant to an order of the High Court or Supreme Court, or by someone of the Secretary rank or above in the interest of national security. 

Fiscal Deficit

  • Fiscal deficit by definition is the difference between total expenditure and the sum of revenue receipts and non-debt receipts.
  • It indicates how much the Government is spending in net terms. Since positive fiscal deficits indicate the amount of expenditure over and above revenue and non-debt receipts, it needs to be financed by a debt-creating capital receipt.
  • Primary deficit is the difference between fiscal deficit and interest payments. Revenue deficit is derived by deducting capital expenditure from fiscal deficits. 

6 . River System of the Day – Facts for Prelims

The Indus River System

  • The Indus originates in the northern slopes of the Kailash range in Tibet near Lake Manasarovar. It follows a north-westerly course through Tibet. It enters Indian territory in Jammu and Kashmir.
  • It forms a picturesque gorge in this part. Several tributaries – the Zaskar, the Shyok, the Nubra and the Hunza join it in the Kashmir region.
  • It flows through the regions of Ladakh, Baltistan and Gilgit and runs between the Ladakh Range and the Zaskar Range.
  • It crosses the Himalayas through a 5181 m deep gorge near Attock, lying north of the Nanga Parbat and later takes a bend to the south west direction before entering Pakistan.
  • It has a large number of tributaries in both India and Pakistan and has a total length of about 2897 km from the source to the point near Karachi where it falls into the Arabian Sea.
  • The main tributaries of the Indus in India are Jhelum, Chenab, Ravi, Beas and Sutlej.

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