Think Learn & Perform (TLP): GS Mains Synopsis [Day 78]

TLP: GS Mains Synopsis [Day 78]

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Q.1) The base year and methodology for National Income Accounting has been changed.The new methodology has significantly revised the economic growth rate and put India at par with international standards of GDP estimation. How far this revision holds true to real economic growth of India?

The Top Answer for this Question is written by – Gajendra Singh

Ans) Recently the base year of GDP calculation has been changed from 2004-05 to 2011-12. The changed methodology is as under:

-Now GDP will be calculated at Market price at fixed price replacing factor cost at fixed price.

-This move is to take into account gross value addition in goods and services as well as indirect taxes.

– Trade of manufactured goods will come under the manufacturing sector earlier it was in service sector. New activities like recycling industries have also been included.

-GDP data will now be based on more than 5 lac companies under MCA-21 scheme. 

This move is to cater the growing demand of harmonizing Indian economy with the global economy. However, this change has trigger debate since its inception. This could be understanding as under:

-The economic growth rate of the year 2012-13 was 5% and in 2013-14 it is 6.6%, however the rate of capital formation has declined (37% to 33%).

-There is deflation in country but data is showing increase in the demand(inflation).

Changes in the GDP are not reflecting the other sectors like profitability of companies and tax collection.

-The chief economic adviser and RBI governor both have expressed their concerns on this however, looking at the growing integration of Indian economy with world economy and under the provision of National System of Accounting of UN and IFSR of IMF this change was necessary. 

Q.2) The government of India and RBI has signed an agreement on Monetary Policy Framework. Describe its salient features. Do you agree with the floating Inflation targeting policy of India?

The Top Answer for this Question is written by – Draconian

Ans) Monetary policy is based on a wide set of information that includes an inflation forecast; transparency in operations; and accountability mechanism.

In the backdrop of Inflation ,high food prices in India ,Urjit Patel Committee was formed on the monetary policy framework which observed that RBI which until now take care of employment , Inflation,exchange rate and various multi point indicator shall restrain it’s target only one Indicator i.e on Inflation on the likes of Bank of Singapore.

Highlights of the Monetary Policy Framework Agreement are:

–it will be operated by the central bank which preempting the long standing friction between FM and RBI governor.

–The ultimate objective is to maintain price stability and reduced volatility in prices

—India’s central bank will aim to bring inflation below 6 percent by Jan 2016 which would vary between a 2% band while bringing the taming inflation to forefront for RBI giving secondary priority to interest rate cut, thus somehow resolving the growth-inflation dilemma.

—It requires the RBI to give out to the Central Government a report in case the target are missed for a period of time,citing reasons and remedial actions.Also, need to give an estimated time-period within which it expects to return to the target level.

Inflation targeting policy is a monetary policy strategy used by central banks for maintaining prices at a certain level or within a specific range while using methods such as interest rate changes, this could help guide inflation to a targeted level or range. This policy is designed to assure price stability.

How it works for India

—Countries adopting inflation targets have tended to have lower and more stable inflation after the change than before, and the framework has proved durable

–There is an explicit inflation target which was announced to the public and the monetary authorities aim to hit that target at a defined point in the future;

— It contains the inflation and in turn achieve price stability in the market helping economy to achieve sustainable long term growth.

—With the adoption framework, India joins countries such as the US, UK, Brazil, Indonesia and South Africa that have a formal inflation target

–increases the investor confidence and can bring in much needed funds for improving infrastructure and creating employment thereby initiate success. “Make in India”.

–Reduction in inflation increases the saving rate making more capital available for investment. and Gold will be just a redundant investment option in the scenario of tamed inflation which will reduce Current account deficit.

To modernize the monetary policy in India, to begin with, regional report like the Beige Book can be initiated therefore Models which are used for forecasting inflation should be placed in public domain to establish credibility and inspire confidence

Its been a big positive step for the economy, as it institutionalizes the monetary policy framework and ensures RBI follows a prudent monetary policy henceforth and If the desired results are achieved, it can accelerate India’s march to economic prowess in the world. 

Q.3) What are the recommendations of Shanta Kumar Committee. Do you think the replacement of PDS with Direct Benefit Transfer will bring a positive change?

The Top Answer for this Question is written by – JKM

Ans) After Food Corporation of India (FCI) has failed in Procurement, storage and Distribution of food grains, government has set up Shanta Kumar Committee on FCI restructuring, whose recommendations are as follow:

Procurement:

i) Outsource procurement to state government who are well experienced and focus on East UP, Bihar, WB and Assam.

ii) Farmers should encourage to deposit his produce to an authorized-warehouse, get a receipt and take loan.

iii) Buffer stock reform needed because FCI has overcrossed buffer stock norms which led to wastage of money, rotten grain and shortage in open market which result to food inflation.

Storage:

iv) FCI should gradually outsource grain storage function to CWC, SWC and Private sector under private entrepreneur Guarantee scheme on competitive bidding.

v) Shift from godowns to Silos with mechanized assemblies like Madhya Pradesh is doing already

vi) End to end computerization and online tracking of entire system

vii) Transportation of grains should be in containers instead of gunny-begs which will reduce losses.

Distribution:

viii) Instead of PDS government should give DBT to farmers and consumers both. By this, the role of middleman and leakage can be reduce very much.

ix) And lastly, Government should limit NFSA to bottom 40% poor because it does not have much financial resource to cover 67% population.

Above recommendations are very much required to implement because the Food security issue is no more remain domestic affair but at global level (IMF) it is highlighted. Government can no more afford to wastage of grains so shifting to DBT will be a positive step, but that is possible only if financial inclusion is there and for that schemes like Jan Dhan yojna should be encouraged. 

Q.4) ‘The idea of GST looks good on paper. But its implementation on field may create confusion amongst enforcing authority and public’. Critically analyse.

The Top Answer for this Question is written by – Cosviny

Ans) The Idea of GST is contemplated as 2 % add on GDP growth By Finance Ministry which may or may not be true but few confusions can be taken as puzzles to solve as challenges amongst authority are :-

1. The GST regime is a proposition of federal landscape where some curtailment of states’ freedom is inevitable. Individual states will lose their right to to tax commodities at the rate they want to GST council.

2. GST is a major shift toward Indirect taxation. The poor and the working classes spend a greater proportion of their income on essential consumption compared to wealthier classes. Thats why is is regressive compared to Direct taxes. how the authorities are going to make corrective for the issue is a great challenge.

3. There are also various inter state regulatory requirements that involved detailed documentation like permits, way bills, tax invoices and delivery notes etc. for which state machinery may not be adequate. the existing machinery is not adapted to high technology IT and computerized tax regime in both centre and state. It pose a greater challenge like how to achieve capacity building or other alternative like new recruits or replacement.

4. the small and tiny units would lose to large scale production gains as small units produce and sell locally only. Small sector that would be outside of the GST net would not be able to sell to the large scale sector due to lack of receipts for payment of value added tax, unaffordability of computerization of accounts etc. Unorganized sector employing 93 % of the workforce. It very crucial to address this problem.

Severe Hurdles and acute challenges are there before enforcing authorities if they are adequately sensitive to the less advantaged population and fear of its lagging behind while there is no denying the fact that GST is progressive for economy by removing many distortions and inefficiencies of it. 

Q.5) What are the problems faced by Insurance Sector in India. Do you think private players should be allowed to compete with Government.organizations in this sector?

The Top Answer for this Question is written by – Khwabeeda

Ans)

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High Order Thinking

Q.1) Whether or not the Armed Forces Special Powers Act (AFSPA) should continue in the areas declared as ‘disturbed’ is a political question which requires consultations at the ground of it’s operation. Unfortunately, the lack of political will in this regard has further alienated the people in these areas. What is your assessment of this argument? Critically examine.

The Top Answer for this Question is written by – SBT57

Ans)

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Image 3 – https://a.disquscdn.com/uploads/mediaembed/images/2807/5949/original.jpg 

Q.2) The recent law passed by the Gujarat government making voting compulsory in civic elections has good intentions. However, in terms of democratic rights and practicality of implementation, it may not hold water. What is your opinion in this regard? Substantiate.

The Top Answer for this Question is written by – The Rock

Ans) Election are considered as bedrock of Indian democracy . However , rising corruption , criminalization and role of black money has reduced public participation in the electoral process . So , to promote voter turnout , Gujarat government introduced compulsory voting which declares voters failing to vote as ” defaulter voter ” .

Arguments for

1. Promotes awareness of political rights , thus promoting accountability of public representatives

2. Increases participation in political process

3. provides legitimacy to government

4. Disechanted voters should exercise NOTA option than abstaining

Though well intentioned , concerns regarding its feasibility and violations of democratic rights are raised like

1. Art Section 79(d) of the Representation of the People Act says: that “electoral right” includes the right “to vote or refrain from voting at an election”

2. Every fundamental right has negative connation , as remarked by Supreme court in P Ratinam case . Thus ,voting cannot be enforced as it against right to speech and expression

3. According to UNESCO report , internal migrants comprise one-third of India’s population , thus enforcement is challenging

4. Increased litigations would over burden the judiciary with high pendency of cases

5. Daily wage and agricultural laborers may lose their income

Thus , need of the hour is to promote voter’s awareness , representative’s accountability and reducing corruption which would promote confidence in electoral system , thus improving turnout , and achieve a true representative parliamentary democracy.

 Q.3) Powerful countries of the world have often taken recourse to sanctions and unilateral war against other countries. Recently, the former UK Prime Minister apologized for some of the mistakes that were committed by his administration in the assessment of intelligence and also the way things shaped up after the war in Iraq. However, there hardly seems any possibility of an international platform condemning such blunders or holding the powerful countries accountable for the war crimes. In a global order like this, how far principles of ethics in international relations hold importance? Analyse.

The Top Answer for this Question is written by – Cosviny

Ans) The underlying problem of the lack of condemnation of blunder at international level is more about about the following concerns:-

1. The lesser democratisation of the world at international level like UNSC and other financial institutions which is reflected in taking decision by few powerful countries about sanctions and wars single handedly or through lobbying. The attack on Iraq by US is apt example.

2. the idealism in Global order with principles of Ethics could not work without balanced global order. The requisite multi polarity with balance would work better for correctives related to blunders done unilaterally by any powerful lobby. Like in case of Libya

3. The east -west and north south inequalities in terms of economic and political or cultural terms may exacerbate the conditions conducive for arbitrary action of powerful country. Like usual interference of powerful countries in failure state of Somalia in name of curbing piracy.

4. the principles of Ethics are not formulated yet unanimously . so a implementing Global government is a necessity. the International court of Justice has been less success in its mandate whether in Sri lanka or Sudan.

All the countries of the world come together to frame ethics in any particular or common crisis related to sanctions against any country, interfering internal affairs of a country when needed , Refugee issue of humanitarian aid or shelter by intake quota for each, reforms in UNSC and wider consensus sought for other issues is prerequisite and long awaited.