9 PM Daily Brief – July 27th,2020

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Here is our 9pm current affairs brief for you today

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9 PM for Main examination

GS-1

  1. Dadabhai Naoroji

GS-2

  1. Contempt of Court

GS-3

  1. Analysis on lowering of corporate tax rate
  2. Stock Exchange for social enterprises
  3. Economic Growth and Youth

9 PM for Preliminary examination

FACTLy


1.Dadabhai Naoroji

Source: Indian Express

Syllabus:  GS-1- Modern Indian History

Context: Contribution of Naoroji and his relevance in present-day India.

Background: Dadabhai Naoroji was born in 1825 at Navsari, in present-day Gujarat.

Contribution of Dadabhai Naoroji

  • Founder of East India Association: He helped found the East India Association in London in 1866. The association voiced the grievances of Indians and suggested remedial measures. He was also instrumental in forming London Indian Society.
  • Formation of Indian national Congress: Naoroji played an important role in formation of Indian national congress and went on to become its President 3 times.  He was the first leader to establish swaraj as the goal of the Congress.
  • Member in British Parliament: He was first Indian to become Member of Parliament in UK and put forward the issues faced by Indians.
  • Economic Contributions:He was one of the key proponents of the “Drain Theory”. His book ‘Poverty and Un-British Rule in India’ (1901) focussed on the drain of wealth from India to England during colonial rule of British in India
  • Nationalism and Outreach to minorities: He is popularly known as the Grand old Man of India and was a flag bearer of Indian nationalism. However, in contrast to present-day majoritarianism, he worked to secure minority participation.
  • Magazines and Other Works: He edited the newspaper Rast Goftar (Speaker of Truth). He started a magazine Dharma Marg Darshak. He also established Rahnumae Mazdayasne Sabha for parsi people to assemble and discuss on current situations in India

2.Contempt of Court

Source – The Hindu

Syllabus – GS 2 – Structure, organization and functioning of the Executive and the Judiciary

Context – The initiation of proceedings for criminal contempt of court against lawyer-activist Prashant Bhushan has once again brought under focus the necessity for retaining the law of contempt as it stands today.

Contempt of court – Article 129 and 215 of constitution of India empowers Supreme Court and High Court respectively to punish people for Contempt of court.

Types of Contempt of Court –

  1. Civil Contempt– It includes disobedience towards court’s order which brings disrepute for the court.
  2. Criminal Contempt– This comprises of scandalizing court’s authority, obstruction in judicial administration and interference in judicial proceedings.

Issues associated with Contempt of Court cases –

  1. Chilling effect on Freedom of speech and expression – An excessively loose use of the test of ‘loss of public confidence’, combined with a liberal exercise of suo motu powers is not good for civil liberties. It amounts to the Court signaling that it will not suffer any kind of critical commentary about the institution at all, regardless of how evidently problematic its actions may be.
  2. Against principle of Natural Justice – It’s a classic case of judges being judges in their own cases.
  3. Against judicial accountability –Judiciary with its use of Suo-motu powers under Contempt of court prevents any form of judicial accountability and thus makes themselves the sovereign power among the other accountable organs – legislature and executive.
  4. Overburdened judiciary – It is not reasonable that instead of taking up matters of absolute urgency in the times of pandemic which are Citizenship (Amendment) Act, the electoral bonds matter, or the issue of habeas corpus petitions from Jammu and Kashmir, the Supreme Court chose to take umbrage at two tweets.

Way Forward – In contemporary times, it is more important that courts are seen to be concerned about accountability, that allegations are resolved by impartial probes rather than threats of contempt action, and processes are transparent.

3.Analysis on lowering of corporate tax rate

Source: Financial Express

Syllabus: GS-3-Economy

Context: The case for a uniform tax rate of 15 per cent in India will minimise tax litigation that arises due to numerous interpretations of exemptions and deductions in tax legislation.

Tax rates in India

  • High rate of corporate tax :The high rate of corporate tax has been a major factor in affecting India’s ability to attract foreign investment for a long span of time. India had a 30 per cent rate of tax on domestic companies, including surcharge and cess, the total tax incidence is 34.9 per cent in the year 2018-19 making the country an exception.
  • Tax rates of other countries : Corporate tax rate in other countries is much lower than India. For example, the US (21 per cent), the OECD average (21.4 per cent), China (25 per cent), Vietnam (20 per cent), Thailand (20 per cent), Singapore (17 per cent), etc.
  • Cumbersome tax laws : Indian tax laws have exemptions and incentives that can help in reducing the tax liability in abundance but it is not sufficient enough to match the low tax rates of other countries.  Further, any prospective investor gets sceptical because of the exemptions and incentives that make the Indian laws cumbersome.
  • Cost of taxation firms : An investor can’t even think of running an enterprise in India without taking the services of a taxation firm for which they have to pay a hefty amount. All this gives rise to nepotism and corruption, and hampers ease of doing business because of the bureaucratic discretion.

Present Government’s  initiatives on corporate tax rates

  • Then-finance minister Arun Jaitley had announced a roadmap for a phased reduction in the corporate tax over a period of five years to 25 per cent, accompanied by elimination of exemptions and incentives in the union budget of 2015-16.
  • The start-ups/ new enterprises and firms having an annual turnover of less than Rs 400 crore were the only ones who got the 25 per cent rate. Including surcharge and cess, the total tax was 29.15 per cent.
  • Finance minister Nirmala Sitharaman introduced a reduction of tax rates for new entities in the manufacturing sector from the existing 25 per cent to 15 per cent with no exemptions and deductions. Thus, the total tax incidence works out to be 17.1 per cent including the surcharge and cess.
  • The existing companies’ tax rates were reduced from 30 per cent to 22 per cent but these are not the final exemptions and deductions that the companies would be mandated to.
  • It’s the companies’ choice whether to opt for 22 per cent or stay on with the existing dispensation, i.e. 30 per cent plus exemptions/deductions.
  • The firms who decide to stay on get to pay the minimum alternate tax (MAT)—it is levied on book profits of a firm which has no taxable profit—at the rate of 15per cent, down from the existing 18.5per cent.
  • Thus, the total tax incidence, including surcharge and cess, worked out to be at 25.17 per cent and is applicable to small firms as well. (The special treatment they earlier got on par with start-ups stands withdrawn)
  • The tax rate is higher than most countries except for China where the tax rate is 25 percent.

Way forward

  • The cumbersome regime won’t go away just by giving the companies the options to choose from. The government can, thus do the following:
  • Erase exemptions and deductions from the rule book but this may not be practical.
  • Give the option of 15% tax sans exemptions/deductions to all the existing companies.

This will make India unambiguously the most attractive destination for foreign investors and will give a big boost to the GDP, increase in exports, better compliance, reduce litigation, and enhance recoveries.

4.Stock Exchange for social enterprises

Source – The Hindubusiness Line

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

Context – SEBI’s working group on the concept of a Social Stock Exchange has submitted a comprehensive report on establishing a structure within the existing stock market ecosystem to enable social enterprises and voluntary organizations to raise funds.

Need for introducing Stock Exchange for social enterprises

  1. Lack of investment in social sector by government– With India ranking 129 among 189 countries on the Human Development Index, that tracks the progress made in education, health and income, there is indeed a pressing need to do more for the social sector and onus has mostly fallen on voluntary organizations as government is under-investing in the social sectors.
  2. Mobilizing resources from various sources – While funds from individual philanthropists have been quite strong in India, amounting to Rs 70,000 crore in 2018, there is an opportunity to help these entities tap other sources of funding such as international philanthropy, domestic CSR, official development assistance and so on.

Issues with recommendations of report

  1. Allowing for-profit entities to raisefunds – The report is complicating matters by allowing both non-profit organizations and for-profit entities on the social stock exchange. Many of the global social exchanges cater only to NPOs, acting as an intermediary that screens and certifies them and helps them find eligible donors.
  2. Misuse of self-declaration clause– The report suggests a self-declaration by FPEs about being a social enterprise. This is likely to be misused, in the absence of agencies that can do independent verification of the declarations made by these FPEs.
  3. No return for investors– The report recommends that the NPOs can raise zero coupon zero capital bonds, listing of equity and debt of NPOs, raising social and development impact bonds and using social venture funds and mutual funds to channel money into charitable causes. However, investors will not get any returns and thus liquidity in these instruments is likely to be scant.

Way Forward – Government’s policy need to allow foreign philanthropic funds to put money in this platform and also allow Indian companies to invest their CSR money in entities listed on a social stock exchange to raise substantive funds for social sector investment.

5.Economic Growth and Youth

Source: LiveMint

Syllabus: GS-3-Economy

Context: Global growth is slowing down and one possible factor for this is the slowing down of the working age population across the world.

Connection between the working class and growth

  • Higher the number of workers entering the labour force, higher is the economy’s potential to grow. Lesser the workforce, less are the chances of economic growth.
  • Increase in the population leads to roughly half of economic growth.
  • If more people are employed and are earning, their monetary spends also increase creating a high consumer demand which leads to business expansions, in this process new jobs are created to meet the demand.
  • This multiplier effect benefits the business as well as the economy.

Data to support the claim

  • Working population in the age group of 15 to 64 grew by 2.05 per cent every year on an average, between 1961 and 1990.
  • The economic growth during this era averaged 4.11 per cent per year and the working age population grew by 2 per cent or more in 25 of the 30 years.
  • Primary cause of the slowing down of the economy in the last three decades is the falling working age population below 2 per cent in the year 1991.
  • In the year 2017, the working age population fell to 1 percent and has remained unchanged ever since.
  • The average working age population between 1991 and 2019 is 1.53 per cent per year.
  • Global economic slowdown to 2.83 per cent per year was observed during this period.
  • The working-age population growth has dropped to 1.21 per cent per year with the economic growth slowing down to 2.5 per cent per year ever since the global recession in 2008.

Is this largely true for western nations only?

  • 17 of the 20 largest emerging economies had a working age population growth rate above 2 per cent in the 1980s.
  • The last time India’s working age population growth rate grew by 2 per cent was in the year 2009.
  • In 2019 India’s working age population growth rate was 1.4 per cent.
  • Any country where the working age population is not growing by over 2 percent will find it hard to constantly grow rapidly and is not just limited to the western countries.

Way Forward

Not every country that sees more than a  2 per cent growth in working age population grows quickly because good demographics are a necessary condition for growth in many instances but this can never be a sufficient condition. Thus, political leaders should create the environment necessary to attract investment and generate jobs to create suitable conditions of work for the working age population.


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