Contents

  1. Cognizant of Constraints
  2. No room for Panic
  3. Falling Short of Aspirations

COGNIZANT OF CONSTRAINTS

Why in news?

he interim report of the 15th Finance Commission, tabled in Parliament on Saturday, has largely preserved the devolution mathematics of its predecessor, belying concerns of a sizeable cut in States’ share

What has the commission said?

The commission has recommended a one percentage point reduction in the vertical split of the divisible pool of tax revenues accruing to States to 41%

  • Former State’s notional share based on the parameters for horizontal devolution would have been about 0.85%, the commission has cited the security and other special needs of the two territories to enhance their aggregate share to 1%, which would be met by the Centre.
  • A crucial new parameter, demographic performance, has been added to the mix. Having been mandated to adopt the population data from the 2011 Census, the commission has incorporated the additional criterion to ensure that States that have done well on demographic management are not unfairly disadvantaged. 
  • Since the norm also indirectly evaluates performance on the human capital outcomes of education and health, it has been assigned a weight of 12.5%.
  • Among the States, with the exception of Tamil Nadu, all the other four southern States see a reduction in the recommended share of taxes for the year 2020-21.
  • Notably, the suggested devolution to Odisha and Uttar Pradesh have also shrunk in percentage terms
  • The commission has also been justifiably critical of the Union and State governments’ tendency to finance spending through off-budget borrowings and via parastatals

NO ROOM FOR PANIC

Why in news?

The Emergency Committee convened by the World Health Organisation (WHO) on January 30 has declared the novel coronavirus outbreak in China as a ‘public health emergency of international concern’, a development that comes after its meeting for the second time in just a week

More about the virus?

  • The virus, that has been infecting hundreds and killing several each day in China, is now being reported in at least 23 other countries  nearly 14,380 cases as on Sunday since the committee last met on January 22-23.
  • There has also been the first confirmed fatality outside China, with a death in the Philippines
  • But the critical factor that prompted WHO’s emergency declaration is the virus’s human-to-human spread in other countries.
  • In fact, WHO’s committee reconvened to assess the situation mainly because of local transmission in other countries

In Kerala, after a student who had travelled from Wuhan city, the epi centre of the current outbreak, was found to be infected, State health authorities reported a second case being detected.

There is no clinical evidence whatsoever that any specific drug, either modern or of the traditional system of medicine, can prevent infection or treat infected people.

It is the novel virus transmitted through physical contact or droplets that causes the infection, and not any food items


FALLING SHORT OF ASPIRATIONS

Why in news?

Expectations from the Union Budget 2020 was that it would reverse the falling growth rate, reduce unemployment and rekindle the animal spirits needed to revive private investment.

Bonds and startups

  • The fundamental problem of infrastructure finance is the asset-liability mismatch which can be addressed only by developing a vibrant ‘corporate bond market.
  • However, the focus of the Budget is the multiple schemes for government bonds mainly through additional room for foreign portfolio investors and exchange traded funds in government bonds

Getting private investment

The Budget’s main growth plank is the hope for a deluge of private infrastructure investment through public-private partnership (PPP) and external sovereign wealth funds that have been given 100% tax exceptions in the Budget. But private investment depends on the cost of capital along with the certainty of returns.

Transportation infrastructure

  • The allocation of ₹1.7 lakh crore for transportation infrastructure is also a welcome step.
  • Everything depends on whether the money actually gets invested or remains unspent as it has happened in the current fiscal year

Social welfare schemes

  • Budgetary allocations for the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are disappointing.
  • The MGNREGA is allocated ₹61,500 crore, which is less than ₹71,000 crore for the current fiscal year

The abolition of dividend distribution tax, and the assurance that tax-related disputes will be considered with compassion might deliver the expected results provided these promises are fulfilled in letter and spirit

Will tax relief boost demand Economic slowdown Legacy IAS Academy Best IAS Academy in Bangalore
Economic Slowdown, Will tax cut boost demand?
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