Daily Current affairs 22 February 2019UPSC - Daily Current Affair
- BrahMos NG (Next Generation): Lethal version of BrahMos Air-based Cruise Missile.
- India is developing an improved version of air-based BrahMos cruise missile capable of being launched from a Light Combat Aircraft.
- In 2017, India flight-tested the air-based version of supersonic cruise missile BrahMos on board Sukhoi-30MKI multirole combat fighter aircraft.
- This made India the only country to have a Supersonic Cruise Missile Triad.
- BrahMos NG will be a reduced size version BrahMos Air-based Cruise Missile capable of being launched even from a Light Combat aircraft.
About BrahMos Supersonic Cruise Missile
- BrahMos is a supersonic cruise missile capable of being launched from land, sea and air.
- It is a joint venture missile between India and Russia.
- BrahMos is a supersonic missile has a top speed of 2.8 Mach (speed of sound).
- The 9 meter-long BrahMos can carry warheads upto 300 kg.
- After India became a full member to MTCR export control regime, the range of BrahMos has increased from 300km to 450km.
Supersonic Cruise Missile Triad
- BrahMos is capable of being launched from land, sea and air based platforms such as warships, submarines, aircraft, and mobile autonomous launchers.
- Indian Army has BrahMos supersonic cruise missile Regiment deployed on western and eastern borders.
- It is integrated with warships such as:
- INS Rajput
- INS Ranvir
- INS Ranvijay
- INS Teg
- INS Tarkash
- INS Trikand
- Kolkata Class
- Indian Air Force is also set to induct BrahMos.
- The IAF has successfully flight-tested BrahMos Air-launched Supersonic Cruise Missile on board SU-30 MKI multirole combat fighter aircraft.
- BrahMos Air-launched Supersonic Cruise Missile weighs 2.5 tonnes compared to 2.9 tonnes of BrahMos.
- BrahMos is also fitted with the indigenous seeker technology recently developed.
- BrahMos NG is a lethal version of Air-launched Supersonic Cruise Missile.
- It will weigh less than 2.5 tonne with electronics replacing mechanical parts. Thus it is capable of being carried by Light Combat Aircraft.
- Tejas LCA and Su-30 MKI can carry 5 and 2 BrahMos NG missiles respectively.
- BrahMos NG is equipped with inertial navigation system and global positioning system. Thus it is capable of high precision attacks on surface targets at a height of 10 meters from the ground.
Significance of BrahMos
- The Army variant is designed to strike targets in urban environments.
- The anti-ship variant augments the Navy’s first strike capabilities.
- BrahMos Air-launched Missile System is capable of keeping a check on Chinese Carrier Strike Group in IOR. (Indian Ocean Region)
- BrahMos NG has the surface-attack capability, and thus can be helpful in surgical strikes across borders.
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Section : Defence & Security
Why in news?
- Recently, the Supreme Court had ordered the eviction of over 11.8 lakh tribals from forest land whose claims over forestland had been rejected by the states.
- In the backdrop of Supreme Court order, the Centre has written to state governments seeking details of tribals and non-tribals who face eviction on account of rejection of claims to ownership document as per provisions of the Forest Rights Act, 2006.
About Forest Rights Act, 2006
- The Forest Rights Act was passed by the government in 2006 and came into force on December 30, 2007.
- According to the Forest Act 2006, persons who have been either traditionally residing in forests or forestland for over 75 years and/or traditionally dependent on forest produce for livelihood are the eligible and rightful claimants to these areas.
- The law makes the gram sabha, the statutory body for managing forestlands, and protecting them.
- It provides that no activity should be carried out in these forests until individual and community claims over them have been settled.
- A PIL was filed by wildlife organizations and retired forest officers, challenging the constitutional validity of the Forest Rights Act and argued that it encourages encroachment of forestland.
- The petitioners demanded that those whose claims over traditional forestlands are rejected under the new law should be evicted.
- The Supreme Court directed state governments to evict tribal whose claims have been rejected.
- In early February, the court had asked state governments to report on the action they had taken against those claimants whose claims have been rejected.
- Subsequently, 20 states filed affidavits with the SC, based on which it pronounced its recent order.
- SC has asked chief secretaries of 16 states to file affidavits before next hearing explaining why orders for eviction have not been implemented till date.
- The total number of rejected claims from 16 states is around 11 lakhs tribal and other forest-dwelling households.
- Several other states will also provide the details about the rejected claims, which likely to raise the number substantially.
- The next hearing is in July 2019 where states have to tell the status of those claims that have not been granted ownership rights.
- Supreme Court is focusing on recovery of forest land from bogus claimants whose claims stand rejected, which occupy a huge area of forest land, including within national parks and sanctuaries.
Tribal groups claim
- Rejections in many cases are faulty and need to undergo review.
- The Forest law does not lead to automatic evictions.
Note: The last country-wide evictions took place in 2002-2004, after Supreme Court order, which led to many cases of violence, deaths and protests in the central Indian tribal forested areas and uprooting of around 300,000 households.
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Section : Social Issues
- As per recent reports, the growth rate of industrial credit has fallen to nearly 7% between 2014 and 2018.
- Also, there has been slowdown in credit off-take during the 2014-2018 period compared to the 2008-2014. However, this gives an incomplete picture and need a detailed analysis.
What is Credit Growth?
- "Credit Growth" refers to the growth/increase in the amount of credit that banks lend to the companies, business man, individuals, institutions, etc. either in the form of retail loans or institutional loans or any other form of loan or credit.
Other parameters to be considered
- Increase in number of accounts:
- In 2008-14, there was a decline in number of accounts in the manufacturing sector.
- However in 2014-18, new accounts has been created particularly in manufacturing and trade sectors, which drive employment and self-employment.
- There has been growth in account creations in Trade, finance and professional services sectors.
- Focus on lower credit limit accounts
- The focus of banks has shifted to generating accounts and credit expansion through lower credit limit accounts.
- There could also be a conscious decision by banks, hindered by the growing NPAs in big-ticket lending (high-cost laons), to move towards lower limit accounts.
- The credit outstanding has increased faster in these lower credit limit account sectors compared to large ticket accounts.
- Small Businesses driving growth
- The highest growth has been registered in the under-Rs 25,000 credit limit with a growth rate of more than 60% during 2014-18, compared to a negative growth in 2008-14, which suggest an industrial distress.
Note: These trends are suggestive of many micro-economic changes happening in the economy that warrant further and deeper research studies.
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Section : Economics
- The negotiations are going on for the Regional Comprehensive Economic Partnership (RCEP) pact in Bali and India is facing pressure to finalise its market opening commitments under the agreement.
- The Regional Comprehensive Economic Partnership (RCEP) is a mega-regional economic agreement between the 10 ASEAN governments and their six FTA partners: Australia, China, India, Japan, New Zealand and South Korea.
- The goal of the negotiations is to:
- Boost economic growth and equitable economic development.
- Advance economic cooperation.
- Broaden and deepen integration in the region through the RCEP.
- The proposed RCEP would cover almost every aspect of economy such as:
- Goods, services and investment.
- Economic and technical cooperation.
- Intellectual property rights (IPR).
- Rules of origin and competition.
- Dispute settlement.
- The RCEP can potentially result in the largest free trade bloc in the world covering about 3.5 billion people and 30 per cent of the world’s Gross Domestic Product.
- The Regional Comprehensive Economic Partnership (RCEP) is being negotiated since 2012.
- However, the deal has missed several deadlines repeatedly, for which one of the reason is that India couldn’t finalise its market opening commitments with some of the members like China, Australia, Japan and New Zealand.
- Considering this fact in the last year’s meeting, other countries allowed India to negotiate with these countries bilaterally and set the deadline as 2019 to finalise the deal.
- India has been holding discussions with China to finalise the level of import duty cuts it can promise but differences remain.
- Now, the RCEP members are pressuring India to finalise its commitments so that the deal could be finalized.
The points of differences between India and China
- Import duty cuts
- India is arguing that it cannot offer tariff elimination on more than 72 per cent of the traded items to China.
- It is because Indian industry faces stiffer competition from the Chinese industry and India needs some protection for many sensitive industrial goods besides agriculture.
- China is unwilling to settle for this 72 percent of the traded items figure as it is lower than what India is offering to the ASEAN countries that is eliminating duties on more than 80 per cent items.
- Longer implementation period
- China is pushing on the option that India should eliminate the imports on larger percent of goods but it can take a much longer implementation period for elimination of tariffs.
- However, India is not settling on this as it may not be enough to give confidence to the Indian industry.
- Moreover, a longer implementation period passes soon and in a couple of years India would have to eliminate duties on all items that it promises.
Highlights of the news
- India is facing a lot of pressure to come to an agreement with China on its commitments.
- It is because the RCEP members want to come to a resolution on market access after the ongoing round of negotiations in Bali.
- For this, the current negotiations will immediately be followed by a trade ministers meet in Cambodia and India is being pressurized to finalise its commitment before that.
- Hence, India has decided to hold intense bilateral discussions with Chinato narrow differences on issues of import duty cuts and the implementation period, as discussed above.
- India will also have bilateral discussions with other members of the grouping such as Australia and Japan.
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Section : International Relation
Topic in News
- India exercises its ‘full rights’ over ‘eastern rivers’ in the Indus river basin under Indus Water Treaty.
- Retaliating to Pulwama attack, India has decided to expedite projects in the eastern rivers of Indus river system to contain its share of water flowing to Pakistan.
- The projects conceived on river Ravi include:
- Shahpur-kandi dam project in Punjab
- Ujh Project in Kathua, Jammu and Kashmir
Indus Water Treaty 1960
- Indus Waters Treaty of 1960 was signed between India and Pakistan at the behest of World Bank for peaceful sharing of water of the Indus river system.
- According to IWT,
- India has full rights over waters of ‘eastern rivers’ Ravi, Beas and Satluj.
- Pakistan has the rights over ‘western rivers’ Indus, Chenab and Jhelum.
- India is the upper riparian state for ‘western rivers’ also.
- Thus under IWT, India is allowed to use ‘western rivers’ for consumption purposes.
- India can use only 20% of the waters from ‘western rivers’ for irrigation, hydel-power stations or transport purposes.
Status of Water-sharing
- India uses 95% of the ‘eastern rivers’, Ravi, Beas and Sutlej (about 33 million acres feet.
- India has 39 dams on ‘eastern rivers’, major ones include:
- Baglihar – Chenab
- Bakra- Sutluj
- Kol- Sutluj
- Pong – Beas
- 5% is allowed to flow to Pakistan.
- To arrest this flow of water from eastern rivers, India will undertake new projects starting from the following projects.
- Shahpur-kandi dam project in Punjab on Ravi
- Ujh Project in Kathua, Jammu and Kashmir on Ujh, tributary of Ravi
About Shahpur Kandi Dam Project- Ravi
- Shahpur Kandi project is a multi-purpose project conceived in Punjab for power generation and irrigation.
- It will fully utilize the water from Ravi.
- Shahpur Kandi is a subsidiary dam to Ranjit Sagar Dam built on river Ravi in 1998.
- Ranjit Sagar Dam is at the border J&K and Punjab.
- Shahpur Kandi is being built in order o completely utilize water from Ravi flowing to Pakistan.
Ujh Multi-purpose Project
- Ujh multi-purpose project is conceived of on Ujh River, tributary of Ravi.
- The Ujh project is planned in Kathua, Jammu and Kashmir.
- It is primarily aimed for irrigation and power generation purposes.
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Section : International Relation
Tax rebate in Finance Bill, 2019:
- The Finance Bill, 2019, has introduced a big tax reform. It enhanced the rebate under Section 87A from Rs 2,500 to Rs 12,500.
- As a result, about 40% of individual taxpayers (those with returned total income of Rs. 5 lakh or less) are absolved of any obligation of paying income tax.
- Accounting for standard deduction as well as other deductions for long-term savings etc, salary earners can easily earn up to Rs. 60,000 per month without having to worry about income tax.
Tax rate cuts usually led to increased tax collections in India:
- Historically, whenever tax rates have been reduced, collections have shot up.
- Sometime impact was immediate:
- In FY75, when personal income tax rates were reduced from 97.75% to 77%, the net revenues of the government of India from this source increased from Rs. 213 crore in FY74 to Rs. 362 crore in FY75
- Further, in in FY77 personal income tax was reduced to 66%, the net revenues of the government of India from this source increased further to Rs. 542 crore.
- Some impact comes with a lag:
- Sometimes, however, the growth comes with a lag of a few years.
- For instance, over FY86 and FY88, the number of tax slabs were reduced to four, and the maximum tax rate was further brought down to 50%.
- Revenues, correspondingly, increased from Rs. 697 crore in FY85 to Rs. 1,492 crore in FY89.
Laffer curve explains this phenomenon:
- Arthur Laffer, the noted American economist, pointed out that when tax rate increase leads to increased total tax up to a point. Beyond the point, the increase in taxes lead to reduced tax collections (as tax evasion, avoidance etc.)
- If a country's taxes are beyond optimal point, then reduction in tax rate could lead to more revenues.
- The fiscal history of modern India quite clearly establishes that rate cuts tend to increase and not decrease tax revenues.
What will be the impact of recent rate cut?
- The impact of this reform on the economy is likely to be multi-layered and complex, but mostly beneficial.
Some immediate loss:
- The estimated the cost, that is the revenue loss, from the additional tax rebate, is Rs. 18,500 crore (that is, the amount of tax collected from slabs below Rs. 5 lakh).
Expected gains in the medium to long term:
- Revenue gains:
- In practical terms, as happened earlier when the tax rates were cut, the recent rate cut may also have no cost, but may actually result in revenue gains.
- Other gains:
- Quite apart from public revenues, the new rationalised structure of rates is likely to affect the economy in a number of other ways as well.
- Productivity increase in employees:
- Among the affected middle classes, it may drive people to work harder, because whatever additional income they earn will now remain with them.
- Any additional income is highly valuable for these taxpayers.
- Wider tax net:
- Many of them may now declare to the tax authorities some income they were earlier trying to evade or avoid.
- This is because they may now find that the cost of compliance is low, but that of evasion and avoidance is high.
- Increased savings or consumption:
- The additional income now available to the taxpayer will either be saved or spent.
- Savings: At the macro level, if it is saved, it will help enhance household savings (recovering from a five-year low of 16.3% of GDP in FY17). This will translate to greater household investment.
- Consumption: On the other hand, if it is spent, it will increase consumer demand. This will help firms utilise excess capacity, and ultimately encourage them into making fresh investments in capital goods.
- Thus, the overall economy will benefit through either savings or consumption.
India's tax structure is good:
- India's incremental tax rates are structured well.
- With the maximum marginal tax rate of 30% (about 36% with various cesses and surcharges), applicable to incomes above Rs. 10 lakh, India’s rate structure is internationally competitive.
But highest slab starts at not too high income levels:
- The 30% tax band starts at a comparatively lower level (above Rs. 10 lakh) than in many other countries.
The tax bands need to be elongated:
- Because of inflation, many taxpayers find themselves being taxed at higher rates, without their real income having increased.
- The tax bands, that were set many years ago, need to be elongated (for example, tax band of 20% has a small range of 5 to10 lakh rupees).
- Suggested tax slabs: The draft Direct Taxes Code (DTC) presented for discussion in 2009 suggested a rate of 10% for incomes up to Rs. 10 lakh, 20% between Rs. 10 lakh and Rs. 25 lakh, and 30% above Rs. 25 lakh.
- In the Indian context, the draft DTC suggested a sensible rate structure.
- The newly elected government should seriously consider adopting it when it presents the full Budget later this year.
- This would carry through the current tax rate reform to its logical conclusion.
GS Paper III: Economy
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Section : Editorial Analysis