9 PM Daily Brief – August 25th,2020

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9 PM for Main examination

GS-2

  1. Strategic autonomy and China’s challenge
  2. Reversing health sector neglect with a reform agenda: The Case of USA and India
  3. India China transactional relationship

GS-3

  1. The Need of Fiscal Council
  2. Falling tax to GDP Ratio

9 PM for Preliminary examination

FACTLy


1.Strategic autonomy and China’s challenge

Source: The Indian Express

Syllabus: GS-2- International Relations

Context: In the 1990s, the pursuit for strategic autonomy from the US drove India into a political coalition with Russia and China that wanted to limit the dangers of the unipolar moment. Today, the logic of strategic autonomy from China pushes India to look for strong security partnerships.

Self-reliance and strategic autonomy

  • Extension of “strategic autonomy” to foreign economic policy marks an important moment in the evolution of India’s international relations.
  • “Strategic autonomy” is the natural external supplement to Prime Minister’s definition of a new economic strategy, described as “Atmanirbharata” or “self-reliance”.
  • Self-reliance today is not about retreating from the world, but of enhancing India’s economic contribution to the global economy. When applied to the foreign policy framework, “self-reliance” becomes “strategic autonomy”.

 Risks in the global economy 

  • The growing consensus among the major economic actors for shorter and more reliable global supply chains.
  • Actions of nations during times of crisis determine how the world really perceives them, and they did bring up many of the risks inherent in the current global economy.
  • De-risking supply chains has now become an explicit policy of many countries, including India.
  • Significant rearrangement of the global economic orderaway from excessive dependence on China as there was a growing international concern that Beijing has taken unilateral advantage of the global trading system.

 The current and earlier context of India’s “strategic autonomy”

  • India’s past emphasis on strategic autonomy was in the context of the “unipolar moment” that emerged after the Cold War. 
  • In the early 1990s, the Clinton Administration concluded that “Kashmir is the world’s most dangerous nuclear flashpoint”and Indian diplomacy for the next two decades tried to change the US policy on both Kashmir and nuclear issues.
  • The US went out of the way to resolve the nuclear dispute with India by changing its domestic laws and international norms on nuclear proliferation under President George Bush.
  • Beijing insisted if India was to be let into the nuclear club, so must Pakistan. When this was refused by the US, China turned an obstacle to India’s membership of the Nuclear Suppliers Group.
  • Today, India’s strategic autonomy is about coping with China’s challenge to India’s territorial integrity and sovereignty.
  • China today is viewed in Delhi as a major threat to India’s economic development as the bilateral trade deficit steadily rose reaching nearly $55 billion in 2019and goods from China were wiping out India’s industrial base.

Steps taken by India

  • India’s current Prime Minister pulled India out of an Asia-wide free-trade arrangement called the Regional Comprehensive Economic Partnershiplate last year.
  • China-led economic order in Asia will permanently doom India’s economic prospects.
  • Beijing’s Ladakh aggression forced India to go from a passive commercial withdrawal to an active economic decoupling from China.
  • Today, the logic of strategic autonomy from China pushes India to look for strong security partnerships with the US, Europe, Japan and Australia.

Way Forward

India is exploring various forms of collaboration with a broad group of nations that have a shared interest in developing trustworthy global supply chains that are not totally tied with China (economically). They promise to make strategic autonomy from a self-assured China a persistent theme of India’s economic and foreign policies in the years ahead.

2.Reversing health sector neglect with a reform agenda: The Case of USA and India

Source: The Hindu

Syllabus: GS-2- Health

Context: United States (first) and India (third) lead the world in number of total Covid-19 cases. These are also the countries which lack effective universal health coverage and urgently need health-care reform post Covid-19.

What is Universal Health Coverage (UHC)?

  • UHC is visualised as an ideal state of health system organisation in which all individuals and communities receive quality health services as per needs, without suffering financial hardship.

Status of Universal Health Coverage in USA

  • The USA had enacted US Affordable Care Act (ACA) which comprises of a number of measures to expand health insurance and improve access, including Medicaid expansion, essential health benefits, and discouraging risk selection in insurance.
  • However, the foundational aspects of U.S. health care, such as a fragmented private insurance landscape and a love for expensive specialised care have been detrimental towards achieving affordable healthcare for all.

India’s attempts towards Universal Health Coverage

Ayushman Bharat:

Ayushman Bharat, as recommended by the National Health Policy 2017, to achieve the vision of Universal Health Coverage (UHC) has been launched. The scheme adopts a continuum of care approach, comprising of two inter-related components:

  • Health and Wellness Centres (HWCs): They are envisaged to deliver an expanded range of services to address the primary health care needs of the entire population in their area, expanding access, universality and equity close to the community.
  • Pradhan Mantri Jan Arogya Yojana (PM-JAY):It aims at providing health insurance cover of Rs. 5 lakhs per family per year for secondary and tertiary care hospitalization to over 10.74 crores poor and vulnerable families (approximately 50 crore beneficiaries).

Issues and Challenges

  • There is large maldistribution of health-care facilities (almost two-thirds of corporate hospitals concentrated in major cities) and low budgetary appropriations for insurance. This raises concern that the universal insurance would not translate to universal access to services.
  • Further, there are concerns over involvement of private players as India does not have regulatory robustness to handle malpractices and monopolistic tendencies
  • Concerns are there over National Digital Health Mission. In the absence of robust ground-level documentation practices and its prerequisites, it would add to administrative complexity and costs like the electronic health records did under the US ACA.
  • There are plans under way to extend coverage to the non-poor population under AB-PM-JAY. This would lead to massive fiscal and design challenges.

Way Forward:  Post pandemic, India requires to mobilise concerted action from all quarters to reform its health-care landscape.

3.India China transactional relationship

Source: The Indian Express

Syllabus: GS-2- International Relations

Context: India is pursuing strategic equilibrium with an increasingly aggressive China, as expressively spoken by External Affairs Minister. China’s efforts are clearly to build a hierarchical Asian order, with itself at the top.

Steps taken by India

  • The foreign minister also seems to be hoping that given its growing pause with the US, China would pay attention to India’s sensitivities.
  • India has bravely been confronting a face-off in the Himalayasfor the past several months in order to seek equilibrium with China.
  • The country has been building creative, issue-based alliances with the US and Asian majors like Japan, Korea, Vietnam and Indonesia, and Australia.
  • “Atmanirbharata” or self-reliancewas introduced by India for economic de-coupling with China.
  • It may take India at least a decade or two to reach an effective “atmanirbharata” versus China, even if its present pace is significantly enhanced.

Steps taken by China

  • China’s efforts are clearly to build a hierarchical Asian order, with itself at the top. Beijing wants India to occupy a slot in such a hierarchy, appropriate only with its power status.
  • China is ruthlessly resisting India’s access to global governance bodies, such as the UNSC and NSG. It is objecting to India’s growing strategic proximity to the US.
  • It is encircling India strategically and economically through its strategic and economic corridors — BCIM (Bangladesh, China, India and Myanmar), CPEC (China-Pakistan Economic Corridor) and the Trans-Himalayan Connectivity Network.
  • It is raising issues like Kashmirat the UN and establishing footprints in the Indian Ocean.

Alternatives to equilibrium and India’s priorities

  • Firstly, an adjustment could be done based on mutual give and takefor some time as China had done with the US in the Seventies and Eighties.
  • Since China has offered to mediate between India and Pakistan, it should be asked to prevail over Pakistan to resolve the Kashmir issue.
  • Various approaches have been tried in the past ranging from formalising the LOC such as Jawaharlal Nehru (then called Ceasefire line), Indira Gandhi (Simla Agreement) and Atal Bihari Vajpayee (Lahore visit) or as worked out by Pervez Musharraf and Manmohan Singh during 2007-08 — to make India-Pakistan borders out of work.
  • Another priority could be the resolution of the border dispute. Past formulae from different package deals mutually offered and discussed may be appealed with innovative redefinitions wherever necessary and practical.
  • India could offer access to Chinese commercial cargos to sea, through the Nathula pass(not a brand new offer), and join China’s BRI on mutually acceptable terms.
  • India may actively move on the BCIM as it had already accepted it in principle in 2013.
  • India can also link up its infrastructure projects in Nepal, as it is already working on them.
  • India may also show its willingness, at least tactically, to join CPEC provided that India is allowed to undertake projects in PoK and Balochistan. 
  • India should revisit its Tibet policy, which is a core irritant for China.
  • It can explore the possibility of relocating the Tibetan Political Administration (in exile in Dharamshala) to a suitable location in Europe, Australia/New Zealand or the US, while continuing to host thousands of Tibetans with dignity and respect.

Conclusion

It is possible that this “give” and “take” may not be acceptable to China. Even if it does not work out as planned, India would have made a bold diplomatic initiative and a huge tactical move towards thinking through out-of-the-box solutions and displaying that it can undertake risks to pursue its long-term national interests

4.The Need of Fiscal Council

Source – The Hindu

SyllabusGS 3- Government Budgeting

Context – The economic slowdown due to the COVID-19 has made it the dire need of the hour to have a fiscal council for a healthy, future foreseeing economic revival.

After effects of COVID-19 pandemic on the economy

  • The government need to borrow and spend more in order-
    • To support vulnerable household
    • To engineer economic recovery
  • More borrowing mean a steep rise in debt which will jeopardize medium term growth prospects.

Issues with the previous institutional mechanisms

  1. The practice of repeated postponement of targets by government.
  2. Timely non-settlement of bill payments and off budget financing to show deficit.

About Fiscal Council

1.Recommendation-It was first recommended by the Thirteenth Finance Commission and was subsequently endorsed by the Fourteenth Finance Commission and then by the FRBM (Fiscal Responsibility and Budget Management) Review Committee headed by N.K. Singh.

2.Working of  Fiscal council-

a.Open Scrutiny– It provides an open scrutiny of government’s fiscal measures which keeps the government on the straight and narrow path of fiscal virtue and holds it to account for any default.

b.Independent analysis– A fiscal council will give an independent and expert assessment of the government’s fiscal stance.

c.Transparency and accountability

    • An unbiased report to Parliament will help to raise the level of debate.
    • Costing of various policies and programmes can help to promote transparency over the political cycle to discourage populist shifts in fiscal policy and improve accountability.

d.Public awareness-

    • Scientific estimates of the cost of programmes and assessment of forecasts could help in raising public awareness about their fiscal implications and make people understand the nature of budgetary constraint.
    • The Council will work as a conscience keeper in monitoring rule-based policies, and in raising awareness and the level of debate within and outside Parliament.

Current global scenario-

  1. According to the International Monetary Fund (IMF), about 50 countries around the world have established independent fiscal institution [IFIs]with varying degrees of success.
  2. Role of IFIs– Independent analysis, review and monitoring and evaluating of government’s fiscal policies and programmes; developing or reviewing macroeconomic and/or budgetary projections; costing of budget and policy proposals and programmes; and presenting policy makers with alternative policy options.
  3. Macroeconomic sustainability– Countries with IFIs tend to have more accurate macroeconomic and budgetary forecasts.

Example -In Belgium, the government is legally required to adopt the macroeconomic forecasts of the Federal Planning Bureau and this has significantly helped to reduce bias in these estimates.

  1. IFIs principles-The Organization for Economic Co-operation and Development [OECD] has recommended important principles needed for successful fiscal councils under following broad heads which are –

Way forward-

Fiscal Council is an important institution needed to complement the rule-based fiscal policy and in its role as a watchdog, it will prevent the government from playing the fiscal rule through creative accounting. Fiscal Council will also help in improving comprehensiveness, transparency and accountability.

5.Falling tax to GDP Ratio

Source- The Hindu

Syllabus- GS 3- Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

Context– COVID 19 has impacted the revenue of the government as it is expected to reduce the tax to GDP ratio of current Financial Year.

Impact of COVID- 19 on Economy

  1. Decline in the Tax collection- India’s tax collection is going to decline sharply this year because of the decline in national income and fall in employment due to COVID- 19.
  2. Increase in Government’s Expenditure-The government has to increase the expenditure to provide relief packages to the citizens during COVID-19 due to unemployment and no source of income, in addition to the other expenditures.
  3. Increase in Fiscal Deficit- The government has committed expenditures which cannot be curtailed. Thus, the fiscal deficit in the budget is set to raise a new high for 2020-21.

Challenges associated with falling tax to GDP ratio

1.Tax concession- Thenumber of tax filers has increased but the number of taxpayers has dropped due to the tax concession offered in the Budget-“those filing a return up to Rs 5 lakh do not have to pay  tax”.

2.Tax to Gross Domestic Product (GDP) Ratio-The direct tax to GDP ratio in percentage terms is stagnating at about 5.5% is another example of decrease in number of taxpayer in spite of increase in population.

3.Category of citizens-

    1. Tax avoidance- If citizens who file tax return, had declared more of their incomes truthfully, the tax to GDP ratio would have risen.
    2. Tax evasion – If citizens who come into the tax net and started filing their returns honestly, there would have been a rise both in the tax to GDP ratio and the number of taxpayers.

4. Individuals fleeing from the country- In last five years, more than 23,000 high net worth individuals left the country due to the fear of payment of more tax.

Government’s reform to increase GDP Ratio

  1. Demonetisation- It wasa step taken by government to bring out the black incomes and turn them white so that the tax to GDP ratio could sharply rise. However, not many people had come into the tax net of government.
  2. Special Investigation Team-
    1. In 2014, the government set up a special investigation team under court orders to tackle the large black economy.
    2. It renegotiated the tax treaty with Mauritius to get back to India the money held abroad. However, it made no difference to prior numbers.
  1. Government schemes-
    1. Introduction of e-filing- The government computerised a considerable part of the tax filing process when e-filing and PAN were introduced. These measures tried to persuade people into filing honest returns.
    2. Samman Scheme- Former Finance minister Yashwant Sinhaintroduced this scheme called “Samman” in budget 1998-99 to demonstrate the society’s recognition of honest tax payers.
    3. Vivad Se Vishwas Scheme- It was introduced to settle tax disputes between individuals and the income tax department.
  1. Transparent Taxation scheme- Prime Minister Modi launched the platform for ‘Transparent Taxation- Honouring the Honest’ aimed at easing compliance and expediting refunds, benefiting honest taxpayers to encourage people to contribute towards national cause honestly.
    1. Complete e-filing process – For ensuring complete objectivity in process, government has handed over the process of taxation to computers. The computer will decide who will assess the tax return of an individual.
    2. No Human to Human contact-During the different stages of a case, different officers will be involved. So that no nexus can be formed between the taxpayers and the officers involved in passing the return and money cannot be paid to evade taxes, this scheme will prevent any form of corruption.
    3. Reorganisation of the department- Thedepartment is being reorganised into assessment units, verification units, review units and technical units. A small unit will take care of the past matters.  

Barriers interrupting Government new scheme

  1. Manipulation of Software- It is concerning that the software can be manipulated by those who knows the system and has access to it.
  2. Burden of cases- The taxdepartment is understaffed and there are high numbers of cases which are pending. A few thousand officers have to deal with lakhs of cases.

Way Forward

Government need to make strict rules so that tax evasion could be controlled. Tax reforms are continuous processes and needs the effective collaboration of officials as well as citizens. Rising tax to GDP ratio will ensure more government expenditure to bring economy back on its track in post Covid India.


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