9 PM Daily Brief – October 12th,2020

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GS-2

  1. Madrid principles
  2. Police and criminal justice system
  3. Tackling fake news
  4. Enhancing tax revenues of local government
  5. GST Compensation Issue

GS-3

  1. MPC – Improving rate transmission.

7. New market led system V/s MSP


9 PM for Preliminary examination

FACTLy

1. Madrid principles

Source: The Hindu

Syllabus: Gs2: Effect of Policies and Politics of Developed and Developing Countries on India’s interests, Indian Diaspora.

Context: Madrid principle could be applied to end the hostility between Armenia and Azerbaijan

How Madrid principles can be used in the present conflict?

  • Armenia and Azerbaijan are located in the main corridor of oil and gas supplies to Europe.
  • The two states had a long-pending dispute over Nagorno-Karabakh’s region.
    • Nagorno-Karabakh’s region is located in Azerbaijan but consists of Majority Armenian population.
  • In 2007, The Minsk Group came up with the Madrid Principles as the basis for the formulation of a peace treaty between Armenia and Azerbaijan.
  • Madrid principles which were drawn from the Helsinki Final Act, provides for the prohibition on the use of force, respect for territorial integrity, and recognition of the equal right to self-determination.
  • The recent military confrontation between Armenia and Azerbaijan, reflects the failure of the Minsk Group of the Organization for Security and Co-operation in Europe (OSCE).

What are the key guidelines stated in Madrid principles?

  • The Madrid Principles envisaged the demilitarisation of Nagorno-Karabakh (the Armenian majority region)
  • It calls for the unconditional withdrawal of Armenian occupying forces from Azerbaijan.
  • It also warrants the need to deploy international peacekeeping forces to monitor the Armenian redeployment, immediately after the Peace Agreement came into force.
  • It assures, “Right to return” for Internally displaced persons and refugees to their original place of residence.

What’s behind the Armenia-Azerbaijan clashes?

  • The two states identified more guidelines to work towards peaceful resolutions. Accordingly, the following agreements were made:
    • it was agreed that Nagorno-Karabakh’s will be provided with right to self-governance
    • It will also have the right to conduct election of officials with legislative and executive powers during the interim period preceding a plebiscite.
    • It is allowed to establish judicial institutions, conduct external relations in certain areas, have representation on OSCE forums relevant to bilateral matters and, crucially, be accorded representation in international organisations where statehood was not a constraint.
  • However, Azerbaijan, seeing itself as the aggrieved party over the years, has resorted to violence and use of force to settle the dispute.
  • Recently, The President of Azerbaijan, has asserted the country’s long-standing claim over the occupied Nagorno-Karabakh, ruling out any dialogue with Armenia until the government there offered an apology.

What is the role of external players in this dispute?

  • Azerbaijan is backed by Turkey, owing to the deep cultural ties between the two countries.
  • Turkey was also accused by French government for sending Syrian rebel forces to fight in the Nagorno-Karabakh conflict.
  • Russia, despite having a military base and a mutual defence agreement with Armenia has so far remained as a mute spectator.
  • Whereas the U.S. has not made themselves involved in this.

Armenia and Azerbaijan need to strike a practical compromise to promote their own mutual interest. For this to happen, principles outlined in the Madrid framework will serve as the starting point to endure peace between the conflicting nations.

2. Police and criminal justice system

Source: The Indian Express

Syllabus: GS-2- Governance

Context:  Accountability of police is required for honest implementation of existing laws.

What was observed in the hathras rape case and what is the reason behind this?

  • The Hathras rape shows that it has a lot to do with hate and caste-related issues as we get to see upper-caste mobilisation in favour of the accused.
  • The National Crime Records Bureau does not compile crimes within categories of hate crimes, lynching, khap-related issues, etc.
  • A report by Amnesty International ponted out that : “It is essential for the country’s penal laws to first recognise the bias behind the commission of such crimes and document the occurrence of such incidents; both of which remain clearly absent currently” .

How does the government uses the police?

  • Transferring officials:  It is misleading for the public, and frustrating for the concerned officers because they do not have any effect in ensuring the rule of law.
  • Illogical action through the police: Invoking the most stringent laws on citizens by the authorities.
    • It has been reported that of the 139 people were booked under national security laws in 2020. Out of them, 76 were for cow slaughter, 13 for anti-CAA protests and only 37 for heinous crimes.
  • Harsh laws are misused because the state is mixing up “national security” with general issues of “maintenance of public order” through statutory provisions, contrary to constitutional norms.
  • Not obeying Court’s direction: The government’s control on the police is such that even the Supreme Court’s direction for the registration of FIRs for cognizable offences is not obeyed by the police system.

What are the supreme court judgements related to this issue?

  • In 2003, the Justice Malimath Committee recommended that the registration of FIRs should be the compulsory duty of the police officer. Failure of this duty should become an offence punishable in law to prevent the misuse of power by the officer.
  • Supreme Court judgment stated that if the information given clearly mentions the commission of a cognizable offence, there is no other option but to register FIR directly.
    • One has to approach the courts of magistrates for non-registration of complaints and the cases remain pending for months.
  • Action and non-action are more influenced by politics than the motivation to ensure the rule of law.
    • Reports on police reforms and criminal law reforms, including the 14-year-old Supreme Court judgment in Prakash Singh, have been ignored by the political powers.

What was the idea behind our constitution?

  • In 1886, the US Supreme Court in Yick Wo v Hopkins stated that “the law itself be fair on its face, and impartial in appearance. Yet, if it is applied and administered by public authority with an evil eye and an unequal hand by making unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the constitution”.
    • B R Ambedkar spoke on the same lines while framing our Constitution.

Way forward

  • There is a committee working on reforms in criminal laws and hopefully it also suggests ways to make the police accountable, and free them from the influence of politics. This is necessary to save the system from embarrassments like the Hathras case.

3. Tackling fake news

Source: The Hindu

Syllabus: GS-2- Governance

Context:  Rise in the instances of fake schemes.

How do the fake schemes work? What are its effects?

  • Case of fake employment and loan schemes:  people receive a personal or general message informing them that they have been selected for a government scheme. They are further asked to pay a certain amount as processing charges to avail the benefits.
    • The fraudsters are available for contact till the processing charge is paid, but disappear once they receive the money.
  • Some fake schemes do not leave any digital trace on the Internetsuch as the Gram Vikas Rozgar Yojana, a fake employment scheme.
  • Political leaders have had to come on television to clarify that there are no such schemes, as in the case of the PM Scooty Yojana.
  • Fake schemes mostly get shared through fake website links on social media platforms, WhatsApp messages and YouTube videos.
    • A simple search with the name of these schemes on platforms like YouTube shows us how deep rooted and successful the fake schemes ecosystem is.
  • Money and privacy in danger: individuals have left their personal details like phone numbers, Aadhaar numbers and bank account details in the comments section on the internet.
  • There is also the danger that they won’t apply for genuine schemes when they constantly come across fake ones.

What are the ways to tackle the problem?

  • The need of the hour is an integrated and rigorous effort by all stakeholders to tackle the threat of fake schemes.
  • There is need for a centralised government portal with a toll-free number where people can inquire about the messages and file complaints, like they do in the case of cybercrimes.
    • The portal should direct the complaints of people who get duped to the relevant State Police, who should be equipped to deal with the fraudulent practices in a swift manner.
  • Social media and technology companies should design dedicated policies: Policies through which they take action against individuals/groups posting such content intended to cheat the public.
  • Websites that have names similar to government schemes need to be monitored, and necessary active action should be initiated if they resort to malpractices.
    • The same can be done with bank account names that sound similar to real government schemes.
  • The government should not only print and broadcast advertisements about genuine schemes, but also alert people about fake schemes so that people are able to differentiate between what’s genuine and what’s fake.
  • One single website would also help where people can access all the information they need about various government schemes at both the Central and State levels.

Way forward

  • Tackling fake news requires a determined effort and coordination between multiple stakeholders such as governments, the media, fact-checkers, NGOs and the civil society.

4.Enhancing tax revenues of local government

Source- Live Mint

Syllabus- GS 2 – Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Context – Tax collection in India at local self-government level is comparatively less than in developing countries.

What is new system implemented by Bengaluru municipal corporation to earn tax revenue?

  • Brihat Bengaluru Mahanagara Palike (BBMP) Municipal Corporation had implemented a modern paid parking system.
  • The system allows you to discover available parking lots on your smartphone and pay the fees online.
  • The BBMP expects this system, implemented as a public-private partnership, to earn an annual income of ₹31.56 crore for the next ten years.

How government can generate revenues from unused or under-used public assets?

  1. Empowering local bodies– To increase the tax collection at the panchayat and municipal level union government and state government must empower the lower level of governments to collect taxes.
    • When the government fails to extract economic value, other actors must step in.
  2. Efficiency– The public finances of states and local governments show a shocking level of inefficiency and wastefulness in terms of meeting their revenue potential, this need to be addressed.
    • For example– Bengaluru collects only 20 percent of its property tax potential.
  3. Tax collection– High-income states such as Haryana, Punjab, Maharashtra and Karnataka have a lot of scope for improvement” in terms of own revenues as a percentage of gross state domestic product.
    • Maharashtra raises 70 percent of its revenue requirement from taxes, five states in India are not able to raise even 30 percent.
  4. More attention– Governments must pay more attention to non-tax revenues by making better use of public assets.Land is perhaps the most ubiquitous asset in the hands of any government.
  5. Innovative thinking– Unused land or building could be used as car parking area or office space. It is this kind of thinking that municipalities must adopt: public assets must not be allowed to idle.
    • For example– the public transport company in Bengaluru built multistorey office buildings over its bus stands in prime commercial locations in the city, it has been earning a steady rental income from them.
    • Parking fees alone have the potential to be a significant part of the corporation’s budget.
  6. Political economy is one of the chief reasons why state and local governments are unable to put public assets to better use. Lack of expertise and political direction are some others.

Way forward-

The current fiscal crisis presents an opportunity for states, municipalities and panchayats to shake up the status quo and get their public finances in better shape. It will require chief ministers to initiate the process.

5. GST Compensation Issue and cooperative federalism

Source: Indian Express

Syllabus: Gs2: Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein.

Context: Issue of compensating states for the loss of their GST revenues

What is the background of the issue?

  • Creation of the GST Council in 2017, to levy GST (unified domestic consumption tax) was hailed as a great example of cooperative federalism.
  • Concerned with loss of revenue due to the new GST regime, states wanted a firm assurance from the Centre to compensate for their revenue shortfall.
  • Accordingly, States were guaranteed compensation for any revenue shortfall below 14% growth (base year 2015-16) for the first five years ending 2022.
  • It was agreed that, the GST compensation will be paid out of Compensation Cess for every two months by the Centre to states
  • In case the amount in the GST compensation fund falls short of the compensation payable in any bi-monthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be repaid by collection of cess in the sixth year or further subsequent years.
  • Due to the pandemic, the revenue collected through cess by the centre is not sufficient to compensate for states GST losses.
  • So, the centre has come up with two options for the states to settle the issue.

What were the options provided for the states?

  • According to the Centre the estimated states’ total loss of GST revenue is Rs 3 lakh crore.Out of which, Rs 65,000 crore was expected to accrue from the compensation cess.
  • To compensate the remaining Rs 2.35 lakh crore, the centre came up with two options.
    • Special window to borrow: First option was to provide states a special window to borrow Rs 1.1 lakh crore from the RBI. Under this option, both the interest payments and the repayments would be made from future collections of the compensation cess.
    • States to borrow entirely: As per the second option, the states can borrow the entire shortfall of Rs 2.35 lakh crore from the market. Unlike the first option, the states have to bear the interest costs and the repayments would be adjusted against future collections of the cess.
  • While few states are willing to abide by first option, some states have rejected both the options and have stated that it is the Centre’s responsibility to compensate the states, and therefore, centre should borrow.

Why it concerns cooperative federalism?

  • The two options were presented without any discussion in the council and mandated the states to choose one of the options within a week.
  • States are being pressurised to accept any of the two option. For example, Recently, there was a statement that those states which do not exercise their option within a week have to wait until 2022.

What is the way forward?

  • It is the Centre’s commitment to find the compensation mechanism.
  • Given the relative fiscal strength of the Centre and the states and as the interest rate of the Centre’s borrowing is lower than that of the states, the Centre should take the responsibility to borrow.
  • Further, interest payments and repayment of the principal liability can be met from future collections from the cess.

This is not merely a matter related to compensation for the loss of revenue, but has to do with the credibility of honouring the agreement. Pressuring states will have adverse consequences for the country’s federal structure.

6. MPC – Improving rate transmission.

Source- The Indian Express

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

Context- The newly constituted MPC has focused on improving rate transmission.

What is the highlight of MPC meeting?

  • Repo rate were kept unchanged at 4%, with a continuation of an accommodative stance.
  • It chose to ignore elevated levels of CPI inflation as transitory and has maintained focus on supporting growth.
  • It appears that the MPC would maintain a status quo on rates through this fiscal year.

What are the current challenges of RBI?

Balance-of-payments (BoP) surplus– India’s foreign currency reserves have been growing at an unprecedented rapid pace.

Factors-

  1. India is getting far more dollars than it needs
  2. Weak domestic economy kept imports weak, even as large fiscal stimuli in the developed world and a rapid output revival in China led to a faster normalization of exports.
  3. Low energy prices, policies supporting Atmanirbhar Bharat naturally mean lower imports, and the push towards making India a participant in global value chains mean higher exports.
  4. Structural reforms– There have also been structural shifts in India’s economic policy which point to a persistent BoP surplus.

However, RBI can direct this surplus into government bonds, it can maintain its independence and credibility, and at the same time achieve its target of rate transmission.

What are the announcements made by the RBI to ensuring the rate transmission?

  • With unchanged repo rates, the focus of the liquidity measures announced by the RBI is to further improve transmission of previous rate cuts across a spectrum of market rates and other instruments.
  • The RBI Governor assured market participants that the large supply of government bonds in the second half along with a likely pick-up in credit demand, would be accommodated through open market purchases of government bonds.

Other measures-

  1. Extending HTM maturity limits– The extension of enhanced Held to Maturity (HTM) limit of banks on their government bonds portfolio to March 2022, will also help improve demand for bonds.
  2. Credit growth– A new on-tap targeted LTRO window was announced, for banks to borrow up to ₹1,000 billion from the RBI at a floating rate linked to the repo rate, and invest in corporate paper issued by specific sectors and to provide loans to them.
  3. Containing Inflation- Higher fuel taxes and import duties are expected to provide an upward push though. Effective supply management will therefore be crucial in controlling food inflation and ensuring that it does not turn persistent and feeds into non-food inflation.
  4. Risk weightages– The central bank also announced a rationalization of risk weightages assigned by banks for all new home loans sanctioned up to March 31, 2022 to spur job-intensive real estate sector.

Way forward-

  • Economic challenges may persist for the foreseeable future. The financial system still needs a major overhaul, and the only permanent solution to the large BoP surplus is stronger domestic demand, and is best achieved through a well-designed fiscal stimulus.

7 New market led system V/s MSP

Source- The Indian Express

Syllabus- GS 3– Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing

Context- The new farm bills offer greater choice to farmers through open market, without demolishing the existing MSP system.

What is MSP system and how the new system can improve the agriculture sector?

Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.

  • However, MSP is not a law but administrative decision of the government. The very existence of APMC does not guarantee MSP.
  • In a surplus economy, unless we allow a greater role for markets and make agriculture demand-driven, the MSP route can spell financial disaster.
  • The MSP system is much more costly and inefficient.

Advantages of new market led system-

  • The new laws are trying to increase the relative role of markets without dismantling the MSP system.
  • The reforms remove all the commodities from the APMC Act and enable the farmers to sell their produce to any private entity, individual buyer, any other state or even the mandis (arhartiyas) as per the earlier model.

What are the issues related to MSP and food subsidies?

  1. Excess storage– This kind of procurement without sufficient storage has resulted in hue piling of stocks in the warehouse. The stock has now become double the requirement under the schemes of PDS, Buffer stock etc.
  2. WTO issues – India’s MSP scheme for many crops has been challenged by many countries in the WTO. For example- Australia has complained of the MSP on wheat.
    • Grain stocks with the FCI cannot be exported without a subsidy, which invites WTO’s objections.
    • They have been claimed to be highly trade-distorting by its method of calculation. If the current process continues, India will face international criticism for breaching the percent norm for subsidy on farm production set by the WTO.
  3. Market distortion– It distorts the free market and favours some particular crops over other crops.
  4. Killing of competition– Any interference by the government kills the competition. This affects the agents who procure the crops at lower prices and sell them at higher prices and earn profit.

What is the success formula of milk commodity?

India is the largest producer of milk with 187 million tonnes annually way ahead of the second-ranked US which produces around 100 million tonnes every year. And, the milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane

  • No government interference– In the case of milk co-operatives, pricing is done by the company in consultation with milk federations, not by the government.
  • It is more in the nature of a contract price – Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.

Way forward-

  • The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere.
  • The new Farmers bill will be a boon for the economy and any loopholes will be addressed by the experts and the policymakers.

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