Part of: GS Prelims and GS -II – International Relations
In news
Lithuania has quit China’s 17+1 cooperation forum with central and eastern European states, calling it “divisive”.
Important value additions
Cooperation between China and Central and Eastern European Countries (China-CEE, China-CEEC)
It is an initiative by China.
Objective: To promote business and investment relations between China and 16 countries of Central and Eastern Europe Countries (CEEC).
Founded in: 2012 in Warsaw.
It will now be known as 16+1 after Lithuanias’ exit.
Do you know?
Central and Eastern Europe is a term encompassing the countries in Central Europe, the Baltics, Eastern Europe, and Southeast Europe (the Balkans),
It usually means former communist states from the Eastern Bloc and Warsaw Pact in Europe.
Lithuania is a country in the Baltic region of Europe.
Capital: Vilnius.
Arctic warms up three times more quickly than the planet
Part of: GS Prelims and GS-III – Environment; Climate change
In news
According to the Arctic Monitoring and Assessment Programme (AMAP) report, the Arctic has warmed three times more quickly than the planet as a whole, and faster than previously thought.
Key takeaways
Arctic sea ice looks set to be an early victim of rising temperatures and the chance of it disappearing entirely in summer is 10 times greater if Earth warms by 2 degree Celsius above pre-industrial levels compared to 1.5° C.
The report coincides with a ministerial meeting of the Arctic Council in Reykjavik, which gathers countries bordering the region.
In less than half a century, from 1971 to 2019, the Arctic’s average annual temperature rose by 3.1° C, compared to 1° C for the planet as a whole.
Do you know?
The Arctic Monitoring and Assessment Programme (AMAP) is one of six Working Groups of the Arctic Council.
Established in: 1991
It has produced various reports that detail the status of the Arctic with respect to climate and pollution issues.
International Atomic Energy Agency (IAEA)
Part of: GS Prelims and GS -II – International Relations
In news
International Atomic Energy Agency (IAEA) was in news recently.
Iran said that a three-month monitoring deal between Tehran and IAEA has expired and IAEA’s access to images from inside some Iranian nuclear sites would cease.
Active volcano in Congo, Mount Nyiragongo, erupted again.
Mount Nyiragongo is an active stratovolcano in the Virunga Mountains associated with the Albertine Rift.
It is located inside Virunga National Park.
The main crater usually contains a lava lake.
Nyiragongo’s lava lake has at times been the most voluminous known lava lake in recent history.
Nyiragongo and nearby Nyamuragira are together responsible for 40% of Africa’s historical volcanic eruptions.
Lava lakes
Lava lakes are large volumes of molten lava, usually basaltic, contained in a volcanic vent, crater, or broad depression.
(Mains Focus)
ECONOMY/ GOVERNANCE
Topic:
GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Covid-19 impact on central and state govt finances
Context: It is relevant to look back at how Covid impacted the government — both at the Centre and in the states — finances over the past year.
Centre’s Finances
The central government’s revenues (both from tax and non-tax sources) fell sharply, on the other, the government overshot its expenditure as well.
This resulted in the Union government’s revenue deficit (the difference between its revenue receipts and its revenue expenditure) as well as its fiscal deficit (a measure of its overall borrowing) rising sharply.
The Covid disruption has meant that the government’s fiscal deficit (both at Centre and state levels) will remain bent out of shape for a few years to come.
In the revised estimate of 2020-21, fiscal deficit exceeds the budget estimate of 2020-21 by Rs. 10.52 lakh crore. The revenue side of the Union budget shows a fall by Rs. 6.44 lakh crore in the 2020-21
Therefore, 61% of the rise in fiscal deficit (as against what was imagined at the time of presenting the Budget in February 2020) was due to a fall in revenue and 39% was due to a rise in expenditure.
What types of revenues fell and why?
TABLE 1 below provides a sense of which type of tax revenues took the biggest hit due to Covid. We can notice that all types did barring the excise duties.
Among the tax revenues sources, the worst-hit was Corporate Income Tax. This was expected at one level as India witnessed a decline in economic activity.
The second biggest dip was in personal income tax collections as any fall in employment and/or wages and salaries is likely to impact Personal Income Tax (PIT) collections.
Reduced incomes also result in reduced consumption and as such, the third biggest hit was the taxes raised on consumption — the GST.
But the most interesting takeaway is the trend in Union Excise Duties (UED), which grew by over 35% in a year that saw overall growth contracting by 8%.
The lower international prices of crude petroleum paved the way for the Union government to raise UED on those refined petroleum products which are not attracting GST, viz., petrol , diesel, Aviation Turbine Fuel (ATF)
Table 1: Union Excise Duties buck the trend thanks to phenomenal growth in cesses and surcharges
Type of revenue
FY21(BE) vs FY21 (RE) [Change in % terms]
Gross Tax Revenue
—21.6
of which
Corporation Tax (CIT)
—34.5
Taxes on Income (PIT)
—28.1
Customs
—18.8
Union Excise Duties (UED)
35.2
Goods and Services Tax (GST)
—25.4
Non-Tax Revenue
—45.3
Concerns with rise in UED
This massive jump in UED collection did not benefit the states since the Union government collected it by increasing cesses and surcharges on UED instead of raising the basic UED rate.
The proceeds of cesses and surcharges are not shareable with state governments.
In fact, if one removed the cesses and surcharges, the UED collections for the past financial year would actually fall by 20%, instead of going up by 50%.
The table below provides another way to understand how far the cesses and surcharges helped the Union government while keeping the states out of the loop.
Cesses accounted for 65% of all the UED collection in FY21 — registering an annual growth of 187% (all data highlighted in red)
How were the state-level government finances impacted by Covid?
States have contained their revenue as well as capital expenditures to cope up with the revenue shock. However, the containment of expenditures was not sufficient to compensate for (the) contraction in total receipts.
As a result, over the first 9 months (three quarters) of FY21, these states saw their revenue deficits exceed the budget target by almost 240% and their fiscal deficit by over 40%.
Beyond the aggregate, there were statewide variations — both in terms of revenues raised and expenditures made (See TABLE 3)
Annual Growth (%) in 2020 vis-à-vis 2019 (up to Quarter 3)
Decreased (in %)
Increased (in %)
Total Receipts
Haryana (-21%), Gujarat (-19%), Karnataka (-18%), Maharashtra (-18%) and West Bengal (-17%), Uttar Pradesh (-15%)
