- Two factors to determine India’s economic course
- GST shortfall is a taxing issue for the government
- Mind the gaps in India’s health care digital push
TWO FACTORS TO DETERMINE INDIA’S ECONOMIC COURSE
Focus: GS-III Indian Economy
The first-quarter GDP growth number — a contraction by 24% — was on expected lines and shows that the Indian economy has slumped sharply due to the lockdown.
Factors to determine the future
Two basic factors would influence the assumptions being made on the growth prospects for the coming quarters
I- Process of Unlocking:
- It has been observed that with the economy moving from the stage of a total lockdown in April to a gradual opening up of the windows in May and June, and then the door opening up a little more significantly in July and August, the movement from one stage to another did reflect in the macro-economic numbers such as the Index of Industrial Production (IIP).
- While it is reasonable to assume that the “Unlock” process will be positive for the economic sectors, there is no assurance that there will not be localised lockdowns.
- The Centre has made strong statements on this issue, but the states could end up taking specific decisions.
- This affects economic activity as supply chains, which span the entire country, get impacted sharply.
- Also, business units are not confident about starting or expanding their business.
II- Revival package from the government
- So far, support from the government has been more through the indirect route, where food relief for the poor has been combined with more aggressive lending by the financial system with guarantees in different forms.
- To boost growth presently, there should ideally be some additional capital expenditure by the government which goes beyond what has been provided in the budget.
- This seems to be the logical solution as the first quarter GDP numbers show a decline in both consumption and investment.
- By increasing capital expenditure, the government can begin a virtuous cycle of creating assets as well as providing employment.
-Source: Indian Express
GST SHORTFALL IS A TAXING ISSUE FOR THE GOVERNMENT
Focus: GS-III Indian Economy
- Recently there has been a heated discussion between the central and state governments on goods and services tax (GST) compensation.
- The Centre had assured states of compensation for any shortfall in tax collections till 2022.
Why are tax revenues under a lot of stress?
- Tax revenues are a function of economic activity. Higher activity growth means higher revenue, while lower growth implies lower revenue.
- Under the present circumstance, in which nearly 65% of the economic sectors were shut during the pandemic, there was limited activity. Consequently, tax revenues were adversely affected.
- The impact has been significant on both direct taxes such as income and corporate tax, as well as indirect taxes such as customs and goods and services tax.
What about the GST shortfall of states?
- Several states were concerned about tax shortfalls because of the implementation of GST.
- This issue was resolved by the central government guaranteeing that the states would be compensated in the event of any tax revenue shortfall.
- Consequently, the compensation cess was levied and any compensation was to be paid from the revenue generated through the compensation cess.
- However, the present circumstance is a different one as the revenue shortfall is not because of the implementation of GST.
- Rather, it is because of a black swan event, which is the coronavirus outbreak.
Aren’t states guaranteed of compensation in any case?
- States argue that the Centre is legally and ethically bound to provide them with GST compensation as promised.
- The Centre recognizes the commitment made towards compensation for shortfall as a result of GST implementation.
- However, the pandemic has significantly impacted tax collections putting a severe constraint on the central government finances.
What about proposals made by the Centre?
- The central government has proposed two solutions to the states.
- The first is to compensate only for the tax shortfall arising due to GST implementation and allowing states to borrow money while the interest on borrowings will be paid using the revenue from compensation cess.
- The other is to allow states to directly borrow the entire tax shortfall, but the interest in such a case will be paid for by the states’ revenue, while the Centre would ensure a lower rate of interest.
What does this mean for India’s citizens?
- Policy prescriptions during downturns include a Keynesian stimulus in the form of high expenditure by the governments.
- Hence, providing states with money to spend is critical for recovery as state expenditure has a higher impact on revival.
- However, with states rejecting proposals, the GST Council will have to find an alternative way to compensate the states.
- In the interim, states may have to resort to raising revenue via disinvestment in state PSUs and monetization of assets.
MIND THE GAPS IN INDIA’S HEALTH CARE DIGITAL PUSH
Focus: GS-III Science and Technology
Why in news?
- The National Health Authority (NHA) has released the Draft Health Data Management Policy of the National Digital Health Mission (NDHM) in the public domain.
- The draft has been released on the website of the NDHM; made available for public comments and feedback, it will be finalised after receiving suggestions from public.
- One of the main objectives of the draft policy is to provide adequate guidance and to set out a framework for the secure processing of personal and sensitive personal data of individuals who are a part of the national digital health ecosystem.
- An IT consulting firm has been engaged to build a National Health Stack and a registry of lakhs of doctors and pharmacies is under preparation.
- Among the many benefits listed are that it ‘would help patients save the burden of carrying medical reports to a specialist or other hospitals’.
- The scheme also intends to replace existing data generation systems with a new homogenised software for all machines in the health sector in the country with a central processor that will extract the relevant data from individual records.
Extensive costs, dilemmas
- On the face of it, from the side of health-care institutions, the NDHM is merely ensuring customisation of a new software and changes in current practices of data maintenance.
- However, it would become inevitable for all institutions in the government as well as private sector to upgrade their hardware too apart from considerable costs in customisation and transfer of existing data.
- Some larger hospitals have already gone for robust and sophisticated software systems such as enterprise resource planning and would be in a dilemma as to whether they need to scrap them or run parallel software provided by the NDHM.
- Among independent practitioners in allopathic and the Indian systems of medicine who run small dispensaries especially in rural areas, there is no practice of even storing patient data on computers. It is largely based on mutual trust and personal memory.
Data leakage and Perception of Concerns
- Public health practitioners at the grass-root level would continue to wonder if digitisation is the immediate problem facing the health sector or the best way to go about addressing data gaps.
- In their eyes, what millions face in the country are unreliable health-care facilities in both the government and private sectors, difficulties in getting timely care, availability of beds and hygienically maintained hospital premises, availability of doctors physically or on line, and the continuous neglect of preventive and community health initiatives.
-Source: The Hindu