News & Editorial Analysis 9 February 2023
The Hindu News Analysis
1 – Gaza Strip:
GS II International Relations
What is Hamas and what does it stand for:
Since its founding in 1987, Hamas has fought war on Israel, principally through suicide bombers and rocket attacks.
Its goal is to topple Israel and install a Palestinian state in its place. It also governs Gaza without the assistance of the Palestinian Authority.
A contract is required:
Since 2007, the Israeli closure on Gaza has been tightened, with most basic products still subject to harsh restrictions.
The Gaza Strip: What Happened:
The Gaza Strip is a man-made entity that originated in 1948 when around three-quarters of Palestine’s Arab residents were relocated, and in some cases expelled, as part of Israel’s creation. The majority of the refugees were spread around the region, including Jordan, Syria, and Lebanon.
Jordan, which assumed control of the West Bank after 1948, attracted some of the refugees. And a large number of people went to Gaza, a small seaside territory sandwiched between Egypt and what is now Israel. In Gaza, refugees now account for around 70% of the population.
Who is responsible for it:
Hamas gained control of the Gaza Strip by force in 2007. Following it, Israel imposed a complete closure on Gaza’s borders. Gaza has been categorised as a hostile entity. Of obviously, Gaza is not a country.
Hamas is designated a terrorist organisation by Israel and many other countries, including the United States, because of its history of attacks on civilians and other crimes.
Right now, the situation is:
Despite Israel’s withdrawal, the UN considers the West Bank to be occupied territory, and Gaza is still considered occupied territory by the UN.
The Palestinians want East Jerusalem to be the capital of a future Palestinian state, while Israel wants Jerusalem as its entire city.
Israel’s claim to the entire city is recognised by just a few countries, notably the United States.
Right now, here’s what’s going on:
Tensions between Israel and Palestinians are regularly high in East Jerusalem, Gaza, and the West Bank.
Hamas, a Palestinian militant group that has attacked Israel multiple times, is in charge of Gaza. To prevent weapons from reaching Hamas, Israel and Egypt maintain tight control over Gaza’s borders.
Palestinians in Gaza and the West Bank fear that Israeli restrictions and actions are harming them. Israel argues it is only acting in self-defense in the face of Palestinian terrorism.
Things have gotten worse since the start of the holy Muslim month of Ramadan in mid-April 2021, with nightly confrontations between police and Palestinians.
The threat of expulsion for certain Palestinian families living in East Jerusalem has caused even more indignation.
2 – Udan Scheme:
GS II Government Policies and Interventions
The UdeDesh Ka Aam Nagrik (UDAN) Scheme entails the following:
The project, which began in 2016, aims to increase connection to the country’s rural and regional areas while simultaneously lowering the cost of air travel.
It’s an important part of Prime Minister Narendra Modi’s National Civil Aviation Policy, which he unveiled in June 2017.
By revitalising abandoned and underused airports, the regional connectivity scheme (RCS) attempts to improve air connection to tier-2 and tier-3 cities.
The scheme subsidises nearly half of the seats on Udan flights, and participating carriers are allocated a certain amount of viability gap money (VGF), which is split between the Centre and the affected states.
The federal and state governments will both back the effort.
The initiative will last for ten years, with the option to extend it if necessary.
The following are the primary characteristics of the scheme:
Airlines are awarded routes through a competitive bidding process and must charge a minimum of 2,500 dollars per hour of travel.
A minimum of 50% of a plane’s total seats must be available at a lesser price.
Airlines receive a three-year subsidy from the government to enable them to offer low-cost flights.
The government set budgeted $4,500 crore in the first three years for the repair of 50 airports.
UDAN 4.0 is the latest version of the software.
The fourth cycle of UDAN was inaugurated in December 2019, with a focus on North-Eastern Regions, Hilly States, and Islands.
The Scheme gives VGF (Viability Gap Funding) priority to airports that have already been developed by the Airports Authority of India (AAI).
In UDAN 4, the operation of helicopters and seaplanes is also covered.
What challenges did you have to overcome:
The financial health of many smaller, regional carriers has impeded the concept.
Many players just have one or two planes, which are often ignored. New planes are extremely expensive for these smaller players.
3 – Pendency Of Cases In Supreme Court:
GS II Indian Judiciary
The problem at hand is:
The retirements come as the court tries to regain its feet following a series of unusually severe epidemic outbreaks. A huge number of cases are still in the works.
With up to 30 million pending cases, India’s court system has the world’s largest backlog of litigation.
The inefficiency of the legal system is demonstrated by the fact that this number continues to climb.
Furthermore, due to the backlog, the bulk of inmates in India’s prisons are detainees awaiting trial.
A case is currently pending in the Supreme Court:
As of April 1, 2022, there are 70,362 cases pending before the Supreme Court, according to data from the court.
Almost 19 percent of them are not ready to be taken before a court for a judicial hearing because they have not fulfilled the necessary preparations.
There are 52,110 cases awaiting admission and 18,522 cases awaiting regular hearings.
There are 422 Constitution Bench cases in total (including main and related topics).
The Supreme Court has only recently began full physical hearings after two years of virtual sessions.
To reduce detention, the government has taken a variety of steps:
Adoption of the “National Litigation Policy 2010” to help the government become a more effective and accountable litigant.
All states adopted their own state lawsuit policies in response to the National Litigation Policy of 2010.
In 2015, LIMBS (Legal Information Management and Briefing System) was created with the objective of keeping track of cases in which the government is involved.
Instead of being sent to overcrowded prisons, the Supreme Court had authorised the government to allocate convicts condemned to 6 months or a year in prison to social service work.
The pressing need of the hour:
The national litigation policy has to be revised.
Alternative dispute resolution procedures should be encouraged to encourage mediation.
Coordination between the government and the courts.
The judicial competency of lower courts should be increased to relieve the load on higher courts.
Increase the funds allocated to the judiciary.
Case management and automation in the court system should be improved.
For each subject, make a bench.
Internal conflict resolution approaches that work.
Shorter and more concentrated judgements should be drafted by judges.
4 – Mystery Liver Disease:
Prelims Specific Topic
Causes:
There has been no tangible evidence discovered so far.
According to Scottish scientists, the predominant theory is that the liver damage is caused by an adenovirus. Viruses that have a wide range of symptoms and are usually linked to respiratory and ocular disorders.
It’s also possible that it’s the result of a Covid-19 infection, or that it’s a new, unidentified strain.
Researchers have ruled out hepatitis, the most common cause of substantial liver inflammation, because the children have tested negative on multiple occasions.
There’s also no proof that it’s caused by a bacterial infection. A coronavirus mutation, according to some, is to blame for the illness.
Symptoms:
Dark pee and pale faeces
Jaundice is a kind of jaundice that can happen to anyone (yellowing of eyes and skin)
itchiness of the skin
Nausea and vomiting
Lethargy
stomach pains
High-temperature setting
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Consolidation In The Context Of The Budget:
Introduction:
The objectives of many socioeconomic groups are intended to be included in the Union Budget for 2023–2024. In the given situation, the effort is laudable. The Budget’s provisions, however, do they adequately address the two main goals of stability and growth? Over the medium term, sustained growth will be the answer to many of India’s social problems, and it depends on the two.
Budgetary support for expansion:
Growth is influenced by the total amount of government spending as well as its revenue and capital components. Government spending is expected to rise by 7.5% in line with the budget, although nominal GDP growth is expected to decelerate from 15.4% in 2022–2023 to 10.5% in 2023–2024.
The total spending as a percentage of GDP will therefore decrease from 15.3% in 2022-2023 (RE) to 14.9% in 2023-2024, as illustrated. (BE). However, the composition of government spending would be favourable to growth.
Compared to a 37% rise in capital expenditures for the Center, budgeted increases in revenue expenditures are only 1.2%. Forecasts from the Reserve Bank of India state that the multiplier for central government capital expenditure is 2.45 while the multiplier for revenue expenditure is 0.45. (2019, 2020). The central public sector undertakings’ (PSUs’) planned decline in investment spending is 0.2% points.
State capital expenditures, however, may increase as a result of federal grants to the States totaling 1.2% of GDP for the purpose of constructing capital assets, an increase in the States’ fiscal deficit to GDP ratio to 3.5%, and the availability of 50 years of interest-free loans for the same purpose in 2023–2024.
It is hard to foresee how States would employ these facilities.
Growth may also be indirectly encouraged as a result of an increase in private disposable income brought on by tax slab modifications that are applicable to the new income tax regime. Real growth in 2023–2024 might be just a hair above 6%.
Outside influences as a cause:
Although this is an operational objective, the Centre must take the appropriate steps to keep its budget deficit at 3% of GDP by March 31, 2021, in accordance with the Budget Responsibility and Budget Management (FRBM) Act, as amended in 2018. To fulfil the statutory goal, the Center’s debt-to-GDP ratio must be lowered to 40%.
If the fiscal deficit-to-GDP ratio is more than 3% higher than expected, the Centre is required to give justification. In the medium-term fiscal policy statement, the Center ascribed the deviation from the budgeted fiscal deficit-to-GDP ratio of 5.9% on external economic factors (MTFP). Due to this, the Center has also resisted making projections about the growth of the economy over the medium term.
Furthermore, the Center has not specified the year in which it expects to reach a 3% GDP fiscal deficit. Instead, it anticipated reaching 4.5% of GDP by 2025–2026 and proposed for a more pronounced adjustment of 0.7% points over the following two years. It could take another two to three years to reach 3%.
Even at this moment, the 40% statutory debt-to-GDP ratio would not have been reached. The Center’s debt-to-GDP ratio will rise from 55.7% in 2022–23 (RE) to 56.1% in 2023–24, according to budget projections, net of liabilities owing to investments in special state-issued securities covered by the National Social Security Fund (NSSF) (BE). This rise is forecast given that the primary deficit to GDP ratio is projected to be 2.3% in 2023–24.
The MTFP statement does not mention the government’s intention to reach the required debt-to-GDP ratio of 40%. The high debt to GDP ratio of the Center has an impact on interest payments, which are anticipated to account for 41% of income receipts in 2023–2024. As a result, the Center’s budget for basic needs has substantially less room.
Personal investment:
To accelerate growth over the medium term, private investment as a percentage of GDP must rise. This requires giving the public sector first dibs on resources before giving the private sector an acceptable number of investable resources.
Current estimates place the total amount of investable resources at 10.5% of GDP, with household sector savings accounting for about 8% of GDP and net foreign capital inflows amounting to 2.5% of GDP.
The federal and state governments’ total budget deficit in 2023–2024 may be 9.4% of GDP. This means that only 1.1% of the resources are accessible to the corporate and public non-government sectors.
The PSUs of the Centre will leave little leeway for State PSUs and the private sector by investing 1.1% of GDP itself in 2023-2024. This does not support an environment where interest rates can be reduced. In fact, trying to borrow more cash than the government has available for investment can only lead to inflation.
Conclusion:
We are aware of the situation the government is in. Any further budgetary cuts would mean less spending, which might not be welcomed. However, we need a more substantial road map for budgetary consolidation in the medium run.
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The Indian Express Editorial Analysis
Budget Unclean Slate:
Current Situation:
After the finance minister recently submitted the Union Budget for 2023–2024 to Parliament, much of the debate centred on the Centre’s fiscal policy and spending objectives.
However, the documents that go with the budget also offer helpful tidbits of knowledge about the corporate, home, and government sectors, which has the effect of modifying the way the Indian economy is structured.
The Budget for 2023–24 highlights the following four major points:
First off, the situation for bigger companies has probably never been better than it is now.
A few major companies now control a disproportionately significant amount of the overall corporate universe, which is in line with the trend of the rising share of capital and the declining share of labour in national income.
Of the more than 9 lakh entities that submitted reports for the 2019–20 tax year, 433 of them showed profits (before taxes) of more than Rs 500 crore. This increased to 517 in 2020–2021, the first year of the pandemic.
In 2020–2021, these 517 businesses generated 62.08 percent of the corporate sector’s overall profits. Together, these 2,075 businesses (who account for barely 0.2% of the whole corporate sector) accounted for 77.41% of all profits. Add to that the 1,558 enterprises whose profits ranged from Rs 100 to Rs 500 crore.
In contrast, the business sector’s overall profits in the year before the pandemic were made up of 75.2% of companies with profits over Rs 100 crore. According to information on publicly traded corporations, this profit concentration is likely to have persisted in the years that followed.
Even if MSMEs and the larger informal sector have started to show signs of revival, it is difficult to say whether this startling economic power concentration has changed.
Second, the effective tax rate for these 517 enterprises comes to about 19.14%, which is significantly lower than the rate for the smaller companies.
The tax rate was 24.82 percent for businesses with profits between $0 and $1 billion and between $1 and $10 billion, respectively. According to the records, these tax rate differences indicate that the larger companies have either switched to the new tax system with lower rates or have taken advantage of the higher deductions or incentives under the previous tax system.
(In September 2019, the government permitted businesses to pay tax at a rate of 22% so long as they didn’t take advantage of exemptions or incentives.
Additionally, new businesses making new investments in manufacturing were taxed at an even lower rate of 15% in order to attract new investments.)
Additionally, there are hints that this regime may have reduced tax disputes. The amounts in dispute, which had increased from the prior year in 2020–21, decreased in 2021–22.
Nevertheless, despite strong hopes, only 3,508 businesses chose the 15% tax system during this time. This shows that possibly not enough new private sector investments in the industrial sector were stimulated by lower tax rates.
Third, despite expectations, the new personal income tax system has not gained much traction to date. However, it’s feasible that the modifications being suggested right now will make it more appealing. Whether people transition to the new system will depend on how much they use the current exclusions.
According to chapter VI-A, section 80 of the Income Tax Act, there are four main exemptions that people can take advantage of: investments, health insurance, the new pension plan, and rent payment.
The amount of money the government loses out on is as follows: investments cost the government Rs 74,937 crore; pension costs Rs 4,810 crore; health insurance costs Rs 6,444 crore; and rent costs Rs 1,361 crore.
Back of the envelope estimates indicate that the tipping point may be a bit less than Rs 9 lakh if a salaried taxpayer takes advantage of exemptions for investments and medical insurance.
However, the income level at which a person will desire to transfer to the new tax system will increase the more exemptions that are claimed.
However, given that only a small percentage of taxpayers actually use all of these exemptions and that the government’s revenue loss gives some indication of how frequently each exemption is used, there is a good chance that more taxpayers will favour the new tax system.
However, how much will also depend on how much each person expects to eventually use these exemptions. This will have an impact on the consumption spike that those in charge of the switch predict.
Fourth, a larger portion of the economy’s overall investment activity is now accounted for by the larger public sector, which includes federal, state, and local governments as well as central public sector businesses.
By the end of 2022–2023, capital expenditure funded by the Union budget would account for just under 25% of all investments (gross fixed capital formation) in the economy when combined with funding from state governments and central PSUs.
Since 2014–15, their share has increased by about 5 percentage points. It is likely that the share of the public sector in total investments in the economy would inch closer to 30% in the coming year if state governments were to just match the central government’s budgeted increase in capex. In the past, state governments have tended to allocate more for capital expenditure than the Center.
Conclusion:
A broad-based recovery in private sector investments and consumption has not materialised, despite larger companies reporting record profits, lower tax rates for both corporate and household sectors, and an increase in public sector capital spending.
Therefore. With the Indian economy’s evolving structure, it is imperative that the private sector take a proactive role in investment, economic growth, and job creation.
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