GOODS AND SERVICE TAX (GST)
1. Context
Demanding the rollback of the 18% Goods and Services Tax (GST) imposed on life and health insurance premiums, the INDIA bloc parties held protests on the steps leading to the Makar Dwar of Parliament
2. What is the Goods and Services Tax (GST)?
- The Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services at each stage of the production and distribution chain. It is a comprehensive indirect tax that aims to replace multiple indirect taxes imposed by the central and state governments in India.
- GST is designed to simplify the tax structure, eliminate the cascading effect of taxes, and create a unified national market. Under the GST system, both goods and services are taxed at multiple rates based on the nature of the product or service. The tax is collected at each stage of the supply chain, and businesses are allowed to claim a credit for the taxes paid on their inputs.
- The GST system in India came into effect on July 1, 2017, replacing a complex tax structure that included central excise duty, service tax, and state-level taxes like VAT (Value Added Tax), among others. The GST Council, consisting of representatives from the central and state governments, is responsible for making decisions on various aspects of GST, including tax rates and rules.
- GST is intended to create a more transparent and efficient tax system, reduce tax evasion, and promote economic growth by fostering a seamless flow of goods and services across the country. It has a significant impact on businesses, as they need to comply with the new tax regulations and maintain detailed records of their transactions for GST filing
3.Goods and Services Tax (GST) and 101st Amendment Act, 2016
The Goods and Services Tax (GST) in India was introduced through the 101st Amendment Act of 2016. This constitutional amendment was a crucial step in the implementation of GST, which aimed to create a unified and comprehensive indirect tax system across the country.
Here are some key points related to the 101st Amendment Act and GST:
- The 101st Amendment Act was enacted to amend the Constitution of India to pave the way for the introduction of the Goods and Services Tax.
- It added a new article, Article 246A, which confers concurrent powers to both the central and state governments to levy and collect GST
- The amendment led to the creation of the GST Council, a constitutional body consisting of representatives from the central and state governments. The council is responsible for making recommendations on GST rates, exemptions, and other related issues
- The amendment introduced a dual GST structure, where both the central government and the state governments have the power to levy and collect GST on the supply of goods and services
- For inter-state transactions, the 101st Amendment Act provides that the central government would levy and collect the Integrated Goods and Services Tax (IGST), which would be a sum total of the central and state GST
- The amendment also included a provision for compensating states for any revenue loss they might incur due to the implementation of GST for a period of five years
The 101st Amendment Act was a critical legislative step that provided the constitutional framework for the implementation of GST in India. It addressed the need for a unified tax system, simplifying the tax structure and promoting a common market across the country. The subsequent establishment of the GST Council has played a pivotal role in the ongoing management and evolution of the GST system in India
4. What are the different types of Goods and Services Tax (GST)?
In India, the Goods and Services Tax (GST) is structured into different tax rates based on the nature of the goods and services. As of my last knowledge update in January 2022, the GST rates are divided into multiple slabs. It's important to note that tax rates may be subject to changes, and new amendments could have been introduced since then. As of my last update, the GST rates are as follows:
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Nil Rate:
- Some goods and services are categorized under the nil rate, meaning they attract a 0% GST. This implies that no tax is levied on the supply of these goods or services.
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5% Rate:
- This is a lower rate, applicable to essential goods such as certain food items, medical supplies, and other basic necessities.
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12% Rate:
- Goods and services falling in this category attract a 12% GST rate. Items such as mobile phones, processed foods, and certain services fall under this slab.
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18% Rate:
- A higher rate of 18% is applicable to goods and services such as electronic items, capital goods, and various services.
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28% Rate:
- The highest GST rate of 28% is applied to luxury items, automobiles, and certain goods and services that are considered non-essential or fall into the luxury category.
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Compensation Cess:
- In addition to the above rates, some specific goods attract a compensation cess, which is levied to compensate the states for any revenue loss during the transition to GST. This is often applied to items like tobacco and luxury cars.
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Zero Rate:
- Certain categories of goods and services may be specified as "zero-rated," which means they are effectively taxed at 0%. This is different from the nil rate, as it allows businesses to claim input tax credit on inputs, capital goods, and input services.
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Exempt Supplies:
- Some goods and services may be exempt from GST altogether. This means that they are not subject to any GST, and businesses cannot claim input tax credit on related inputs
5.Central GST (CGST), State GST (SGST), Union territory GST (UTGST) and Integrated GST (IGST)
| Subject | Central GST (CGST) | State GST (SGST) | Union Territory GST (UTGST) | Integrated GST (IGST) |
|---|---|---|---|---|
| Levied by | Central Government | Respective State Governments | Union Territory Administrations | Central Government (on inter-state transactions) |
| Applicability | On intra-state supplies (within the same state) | On intra-state supplies (within the same state) | On intra-union territory supplies (within the same union territory) | On inter-state supplies (across states or union territories) |
| Rate Determination | Determined by the Central Government | Determined by the Respective State Government | Determined by the Union Territory Administration | IGST rate is a sum of CGST and SGST rates |
| Revenue Collection | Collected by the Central Government | Collected by the Respective State Government | Collected by the Union Territory Administration | Collected by the Central Government (on inter-state transactions) |
| Utilization of Revenue | Shared between Central and State Governments | Retained by the Respective State Government | Retained by the Union Territory Administration | Shared between Central and State Governments |
| Purpose | Part of the dual GST structure, meant to cover central taxes | Part of the dual GST structure, meant to cover state taxes | Applicable in union territories for intra-territory supplies | Applied to regulate and tax inter-state supplies |
| Input Tax Credit (ITC) | ITC available for CGST paid on inputs and services | ITC available for SGST paid on inputs and services | ITC available for UTGST paid on inputs and services | ITC available for both CGST and SGST paid on inputs |
| Tax Jurisdiction | Applies within a particular state | Applies within a particular state | Applies within a particular union territory | Applies to transactions across states and union territories |
| GSTN Portal for Filing Returns | Central GSTN portal | State-specific GSTN portals | UTGSTN portal | Integrated GSTN portal |
6.What are the benefits of Goods and Services Tax (GST) in India?
The Goods and Services Tax (GST) in India was implemented with the aim of bringing about significant reforms in the indirect tax structure. Several benefits have been associated with the introduction of GST.
Here are some key advantages:
- GST replaced multiple indirect taxes levied by the central and state governments, simplifying the tax structure. This streamlined system reduces the complexity of compliance for businesses
- GST eliminates the cascading effect of taxes, where taxes are levied on top of other taxes. With a seamless credit mechanism, businesses can claim input tax credit on the taxes paid on their purchases, leading to a more transparent and efficient system
- GST has facilitated the creation of a common national market by harmonizing tax rates and regulations across states. This has reduced trade barriers and promoted the free flow of goods and services throughout the country
- The GST system has incorporated technology-driven processes, including electronic filing and real-time reporting, making it harder for businesses to evade taxes. This has contributed to increased tax compliance
- The input tax credit mechanism under GST benefits manufacturers, as they can claim credits for taxes paid on raw materials and input services. This has a positive impact on the cost of production and enhances the competitiveness of Indian goods in the international market
- GST brings transparency to the taxation system. The online filing of returns and the availability of transaction-level data make it easier for tax authorities to monitor and track transactions, reducing the scope for corruption
- GST has replaced a complex system of filing multiple tax returns with a more straightforward mechanism. Businesses now need to file fewer returns, reducing the compliance burden
- The implementation of GST has contributed to an improvement in the ease of doing business in India. The unified tax system has made it simpler for businesses to operate across states and has reduced the paperwork and bureaucratic hurdles associated with tax compliance
- GST has led to the harmonization of tax rates across states and union territories, minimizing the tax rate disparities that existed earlier. This creates a more predictable tax environment for businesses
7.Goods and Services Tax (GST)-Issues and Challenge
- Despite the intention to simplify the tax structure, the multi-tiered rate system (0%, 5%, 12%, 18%, and 28%) and the inclusion of cess on certain goods have introduced complexity. The classification of goods and services under different tax slabs can be challenging, leading to disputes and confusion
- The successful implementation of GST relies heavily on technology. Issues such as technical glitches on the GSTN (Goods and Services Tax Network) portal, especially during the initial phases, have caused difficulties for businesses in filing returns and complying with regulations
- The compliance requirements for businesses under GST, including multiple returns filing, have been perceived as burdensome. Smaller businesses, in particular, may find it challenging to adapt to the new system and comply with the various provisions
- The transition from the previous tax regime to GST posed challenges, especially for businesses in terms of understanding the new tax structure, reconfiguring accounting systems, and ensuring a smooth transition of credits from the old tax system to the GST system
- The classification of certain goods and services into specific tax slabs has been a source of contention. Ambiguities in classification have led to disputes and litigations, with businesses seeking clarity on the applicable tax rates
- The implementation of GST has increased compliance costs for businesses due to the need for sophisticated IT infrastructure, the hiring of tax professionals, and efforts to ensure accurate reporting and filing
- Challenges related to availing and matching input tax credits have been reported. Timely matching of credits and resolving discrepancies can be cumbersome, leading to concerns about the seamless flow of credit across the supply chain
- The anti-profiteering provisions were introduced to ensure that businesses pass on the benefits of reduced tax rates to consumers. However, the implementation of anti-profiteering measures has been criticized for its complexity and potential for disputes
- The periodic changes in the GST return filing system have created challenges for businesses in adapting their processes. Delays and complexities in return filing can affect working capital management
8.Goods and Services Tax Council (GST Council)
The Goods and Services Tax Council (GST Council) is a constitutional body in India that makes recommendations on the Goods and Services Tax (GST). It was established under the Constitution (122nd Amendment) Act, 2016, which introduced the GST in India
The GST Council consists of the following members:
- The Union Finance Minister, who is the Chairperson of the Council.
- The Union Minister of State in charge of revenue or any other Minister of State nominated by the Union Government.
- One Minister from each state, nominated by the Governor of that state.
- The Chief Secretary of each state, ex-officio.
- If the President, on the recommendation of the Council, so directs, one representative of each Union territory which has a legislature, to be nominated by the Lieutenant Governor of that Union territory.
- Three to seven members (other than Ministers) to be nominated by the Union Government, of whom at least one member shall be from the field of economics and another from the field of chartered accountancy, legal affairs or public finance
9. Way forward
It's important to note that the composition and structure of the GST Council may evolve over time, and there might have been changes since my last update in January 2022. To obtain the latest and most accurate information about the GST Council and its members, it is recommended to refer to official government sources or recent announcements by the relevant authorities
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For Prelims: Economic and Social Development and Indian Polity and Governance
For Mains: General Studies II: 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
General Studies III: Inclusive growth and issues arising from it |
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Previous Year Questions
1.Which of the following are true of the Goods and Services Tax (GST) introduced in India in recent times? (UGC Paper II 2020)
A. It is a destination tax
B. It benefits producing states more
C. It benefits consuming states more
D. It is a progressive taxation
E. It is an umbrella tax to improve ease of doing business
Choose the most appropriate answer from the options given below:
A.B, D and E only
B.A, C and D only
C.A, D and E only
D.A, C and E only
Answer (D)
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Source: Indianexpress
INTERNATIONAL CRIMINAL COURT
1. Context
Britain abandoned its intent to challenge the prosecutor’s application for arrest warrants before the International Criminal Court (ICC) against Israel’s Prime Minister Benjamin Netanyahu and Defence Minister Yoav Gallant. The latest move signals a second policy shift by the Labour government, from the previous Conservative government, after it restored funding for the UNRWA, the UN agency for Palestinian refugees
2. About International Criminal Court (ICC)
- The ICC, headquartered in The Hague, Netherlands, was established in 1998 under a treaty called the Rome Statute.
- It investigates and, where warranted, tries individuals charged with the gravest crimes of concern to the international community: genocide, war crimes, crimes against humanity, and the crime of aggression.
- Presently, 123 countries are party to the Rome Statute, including Britain, Japan, Afghanistan, and Germany.
- However, the USA has kept its distance, maintaining that ICC should not exercise jurisdiction over citizens of countries that are not a party to it.
- Similarly, India and China have also abstained from membership.
- The ICC was established to prosecute the most heinous offenses only when a country’s own legal machinery fails to act, as was the case in former Yugoslavia and Rwanda.
- Unlike the International Court of Justice (ICJ), which deals with countries and inter-state disputes, the ICC prosecutes individuals.
- However, the ICC’s jurisdiction is limited to offenses occurring after it came into effect on July 1, 2002.
- Additionally, the offences should be committed either in a country that ratified the agreement or by a national of a ratifying country.
- The ICC can also practice its jurisdiction over cases referred by the UN Security Council to it.
3. Does the ICC have the power to prosecute Russia?
- This is the first time that the ICC has issued an arrest warrant against one of the five permanent members of the UN Security Council.
- Russia found this outrageous and unacceptable because any decision of the court was
null and void due to Russia not being an ICC member. - However, this move creates a situation where Putin risks arrest every time he travels.
- According to The New York Times, this move, along with the existing sanctions in the West, will further deepen his isolation and limit his overseas movements.
- Moreover, if he travels to a state party to the ICC, then that country must arrest him according to its obligations under international law.
4. Does Ukraine recognize ICC's Jurisdiction?
- Ukraine is not a State Party to the Rome Statute, but it has twice exercised its options to accept ICC’s jurisdiction over alleged crimes under the Rome Statute, occurring on its territory, under Article 12(3) of the Statute.
- Article 12(3) states that if the acceptance of a state that is not a party to the statute is required, the state may accept the jurisdiction of the court for a crime concerned, by making a declaration to the Registrar and cooperating without any delay or exception.
- The alleged crimes, including the deportation of children, were detailed in a report by the Independent International Commission of Inquiry on Ukraine, an UN-mandated investigative body that said some acts may amount to crimes against humanity.
5. How is ICC different from ICJ?
- Unlike the International Court of Justice, the ICC is not part of the United Nations system, with the UN-ICC relationship being governed by a separate agreement.
- The ICJ, which is among the UN’s 6 principal organs, mainly hears disputes between nations. It was established in 1945 and is seated in The Hague (Netherlands).
6. What is the Independent International Commission of Inquiry Report on Ukraine?
- In its report dated March 16, 2023, the commission outlined the body of evidence and how it points to Russian authorities committing a wide range of violations of international human rights law and international humanitarian law in many regions of Ukraine and the Russian Federation.
- Many of these amount to war crimes and include wilful killings, attacks on civilians, unlawful confinement, torture, rape, and forced transfers and deportations of children, the report states.
- Contending that the Russian armed forces carried out attacks with explosives in populated areas with an apparent disregard for civilian harm and suffering, the report documented the indiscriminate, disproportionate attacks and failure to take precautions, thereby violating international humanitarian law.
- The commission also found that the Russian military’s waves of attacks on Ukraine’s energy infrastructure from October 2022 and its use of torture could amount to crimes against humanity.
- It also recommended further investigation to hold the responsible agents comprehensively accountable, in a way that includes both criminal responsibility and the victims’ right to truth, reparation, and non-repetition.
Previous year Question
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1. Which of the following characterizes International Criminal Court (ICC)?(UGC NET 2020)
(A) The Rome statute established ICC as a 'Court of last resort'
(B) ICC can exercise jurisdiction only when national courts are unwilling or unable to investigate or prosecute
(C) It can not prosecute acts of war crimes
(D) ICC is not located in the Hague
Choose the correct answer from the options given below:
1. (A) and (B) only
2. (B) and (C) only
3. (C) and (D) only
4. (A) and (D) only
Answer: 1
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For Prelims: International Criminal Court (ICC), The Hague, Netherlands, Rome Statute, UN Security Council, Article 12(3) of the Statute, and International Court of Justice (ICJ).
For Mains: 1. What is the difference between the International Criminal Court (ICC) and the International Court of Justice (ICJ).
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Source: The Indian Express
GROSS DOMESTIC PRODUCT (GDP)
1. Context
The country’s growth rate is, however, expected to moderate in the coming quarters of this financial year, given the effect of the El Nino on the monsoon, weakness in mining output, and sluggish exports, and a possible slowing in the momentum of government capex as Lok Sabha elections approach.
2. Gross Domestic Product (GDP)
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It is often used as a measure of a country's economic health
GDP provides insight into the overall economic health of a nation and is often used for comparing the economic output of different countries.
There are three primary ways to calculate GDP:
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Production Approach (GDP by Production): This approach calculates GDP by adding up the value-added at each stage of production. It involves summing up the value of all final goods and services produced in an economy.
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Income Approach (GDP by Income): This approach calculates GDP by summing up all the incomes earned in an economy, including wages, rents, interests, and profits. The idea is that all the income generated in an economy must ultimately be spent on purchasing goods and services.
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Expenditure Approach (GDP by Expenditure): This approach calculates GDP by summing up all the expenditures made on final goods and services. It includes consumption by households, investments by businesses, government spending, and net exports (exports minus imports).
3. Measuring GDP
GDP can be measured in three different ways:
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Nominal GDP: This is the raw GDP figure without adjusting for inflation. It reflects the total value of goods and services produced at current prices.
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Real GDP: Real GDP adjusts the nominal GDP for inflation, allowing for a more accurate comparison of economic performance over time. It represents the value of goods and services produced using constant prices from a specific base year.
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GDP per capita: This is the GDP divided by the population of a country. It provides a per-person measure of economic output and can be useful for comparing the relative economic well-being of different countries.
The GDP growth rate is the percentage change in the GDP from one year to the next. A positive GDP growth rate indicates that the economy is growing, while a negative GDP growth rate indicates that the economy is shrinking
The GDP is a useful measure of economic health, but it has some limitations. For example, it does not take into account the distribution of income in an economy. It also does not take into account the quality of goods and services produced.
Despite its limitations, the GDP is a widely used measure of economic health. It is used by economists, policymakers, and businesses to track the performance of an economy and to make decisions about economic policy
4. Gross Value Added (GVA)
Gross Value Added (GVA) is a closely related concept to Gross Domestic Product (GDP) and is used to measure the economic value generated by various economic activities within a country. GVA represents the value of goods and services produced in an economy minus the value of inputs (such as raw materials and intermediate goods) used in production. It's a way to measure the contribution of each individual sector or industry to the overall economy.
GVA can be calculated using the production approach, similar to one of the methods used to calculate GDP. The formula for calculating GVA is as follows:
GVA = Output Value - Intermediate Consumption
Where:
- Output Value: The total value of goods and services produced by an industry or sector.
- Intermediate Consumption: The value of inputs used in the production process, including raw materials, energy, and other intermediate goods.
5. GDP vs GNP
Gross Domestic Product (GDP) and Gross National Product (GNP) are both important economic indicators used to measure the size and health of an economy, but they focus on slightly different aspects of economic activity and include different factors. Here are the key differences between GDP and GNP:
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Definition and Scope:
- GDP: GDP measures the total value of all goods and services produced within a country's borders, regardless of whether the production is done by domestic or foreign entities. It only considers economic activities that take place within the country.
- GNP: GNP measures the total value of all goods and services produced by a country's residents, whether they are located within the country's borders or abroad. It takes into account the production of residents, both domestically and internationally.
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Foreign Income and Payments:
- GDP: GDP does not consider the income earned by residents of a country from their economic activities abroad, nor does it account for payments made to foreigners working within the country.
- GNP: GNP includes the income earned by a country's residents from their investments and activities abroad, minus the income earned by foreign residents from their investments within the country.
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Net Factor Income from Abroad:
- GDP: GDP does not account for net factor income from abroad, which is the difference between income earned by domestic residents abroad and income earned by foreign residents domestically.
- GNP: GNP includes net factor income from abroad as part of its calculation.
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Foreign Direct Investment:
- GDP: GDP does not directly consider foreign direct investment (FDI) flowing into or out of a country.
- GNP: GNP considers the impact of FDI on the income of a country's residents, both from investments made within the country and from investments made by residents abroad.
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Measurement Approach:
- GDP: GDP can be calculated using three different approaches: production, income, and expenditure approaches.
- GNP: GNP is primarily calculated using the income approach, as it focuses on the income earned by residents from their economic activities.
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For Prelims: GDP, GVA, FDI, GNP
For Mains: 1.Discuss the recent trends and challenges in India's GDP growth
2.Examine the role of the service sector in India's GDP growth
3.Compare and contrast the growth trajectories of India's GDP and GNP
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Previous Year Questions
1.With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (b)
2.A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (a)
Previous year UPSC Mains Question Covering similar theme: Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC CSE GS3, 2020) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE GS3, 2021) |
Source: indianexpress
INDIA-BANGLADESH
1. Context
Bangladesh Prime Minister Sheikh Hasina resigned and fled the country on Monday after hundreds of people were killed in a crackdown on demonstrations that began as protests against job quotas and swelled into a movement demanding her downfall.
2. The Evolution of India-Bangladesh Ties
- The genesis of India's relationship with Bangladesh traces back to the 1971 Bangladesh Liberation War when India played a crucial role in providing military and material support for Bangladesh's fight for independence from Pakistan.
- However, in the aftermath, relations faced challenges as military regimes took control, leading to a rise in anti-India sentiment in the mid-1970s.
- Issues such as boundary disputes, insurgency, and water-sharing disputes contributed to the strained ties.
- The situation persisted for several decades until Sheikh Hasina assumed power in 1996, ushering in a new era in bilateral relations.
- Under her leadership, a significant milestone was reached with the signing of a treaty on the sharing of Ganga waters.
- Since then, India and Bangladesh have successfully fostered cooperation in various areas, including trade, energy, infrastructure, connectivity, and defence.
3. India-Bangladesh Economic Ties
- Over the past decade, bilateral trade between India and Bangladesh has demonstrated consistent growth.
- Bangladesh has emerged as India's largest trade partner in South Asia, with bilateral trade surging from $10.8 billion in 2020-21 to $18 billion in 2021-2022.
- However, a slight dip occurred in 2022-23 due to the impact of the pandemic and the Russia-Ukraine war.
- In return, India stands as Bangladesh's second-largest trade partner, with exports amounting to $2 billion in the Indian markets.
- In 2022, both countries successfully concluded a joint feasibility study on a Comprehensive Economic Partnership Agreement (CEPA).
- This agreement, designed to reduce or eliminate customs duties on traded goods and streamline trade norms, is expected to unlock broader social and economic opportunities.
- The CEPA gains added significance as Bangladesh is poised to lose its Least Developed Country (LDC) status after 2026, thereby forfeiting its duty-free and quota-free market access in India.
- Dhaka is keen to finalize a Free Trade Agreement (FTA) with New Delhi and simultaneously pursue the China-backed Regional Comprehensive Economic Partnership (RCEP). This dual-track approach raises concerns for India.
4. India's Infrastructural Investments in Bangladesh
- As a significant development partner for Bangladesh, India has been actively contributing to various infrastructure and connectivity projects.
- Since 2010, India has provided Lines of Credit totalling over $7 billion. A milestone in this collaboration was achieved last year when Prime Minister Modi and Sheikh Hasina inaugurated the Akhaura-Agartala rail link, connecting Bangladesh and the northeast through Tripura.
- This link grants India access to Chattogram and Mongla ports in Bangladesh, facilitating cargo movement and poised to stimulate small-scale industries while fostering the development of Assam and Tripura.
- In the energy sector, Bangladesh imports nearly 2,000 megawatts of electricity from India.
- The BIMSTEC Master Plan for Transport Connectivity is instrumental in connecting major transport projects in India, Bangladesh, Myanmar, and Thailand, thereby establishing a comprehensive shipping network.
- India's focus is likely to be on the Matarbari Port, situated approximately 100 km from Tripura, being developed by Bangladesh.
- This port will play a pivotal role in establishing a crucial industrial corridor, connecting Dhaka with the northeastern part of India.
5. Navigating Challenges in the India-Bangladesh Relationship
- Several points of tension mark the diplomatic landscape between India and Bangladesh.
- Foremost among them is the impending Teesta dispute, which holds a central position in the agenda of the Hasina-led government.
- This dispute revolves around the equitable sharing of Teesta's waters, with Bangladesh seeking a fair distribution.
- Another source of contention is the Rohingya issue. The Hasina government aims for the peaceful repatriation of Rohingyas to Myanmar, but talks with the military junta have proven unsuccessful thus far.
- Bangladesh seeks India's cooperation to influence Myanmar, but the Modi government, with ties to the junta, asserts its intention to deport Rohingyas from its mainland.
- Cross-border terrorism and infiltration pose additional threats to internal security. The rise of majoritarian forces adds complexity to the already intricate landscape.
- While violence against Muslims has increased in India in recent years, Prime Minister Hasina has consistently condemned these attacks and expressed dissatisfaction with comments by Indian leaders concerning "illegal" immigrants.
6. Global Influences on the India-Bangladesh Relationship
- The Awami League government under Sheikh Hasina has faced vocal criticism from the U.S., particularly concerning "democratic backsliding."
- In 2021, the Biden administration imposed sanctions on a Bangladeshi anti-crime and anti-terrorism task force, citing human rights violations.
- Tensions escalated further as the U.S. announced a policy to restrict visas for Bangladeshis deemed responsible for undermining the election process in the country. This external pressure has implications for the global ties of Bangladesh.
- Adding to India's concerns is the deepening relationship between Bangladesh and China, marked by substantial Chinese investments in infrastructure in recent years.
- According to the Chinese Ambassador to Bangladesh, China has undertaken the construction of 12 highways, 21 bridges, and 27 power and energy projects in Bangladesh.
- However, Prime Minister Hasina has asserted that her government is "very much careful" about its partnership with China.
7. The Way Forward
Despite challenges, the India-Bangladesh relationship boasts strong potential for further growth. Open communication, constructive dialogue, and focus on shared interests are crucial for navigating the complexities and ensuring a prosperous future for both nations.
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For Prelims: India-Bangladesh, Free Trade Agreement, Rohingyas, Teesta River, BIMSTEC, Comprehensive Economic Partnership Agreement
For Mains:
1. Assess the role of China's growing influence in Bangladesh and its implications for the India-Bangladesh relationship. How can India navigate this complex geopolitical landscape? (250 Words)
2. Discuss the potential benefits of the BIMSTEC Master Plan for Transport Connectivity for India, Bangladesh, and the broader region. What are the key considerations for effective implementation and ensuring equitable benefits? (250 Words)
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Previous Year Questions
1. With reference to river Teesta, consider the following statements: (UPSC 2017)
Which of the statements given above is/are correct? (a) 1 and 3 only (b) 2 only (c) 2 and 3 only (d) 1, 2 and 3 2. Consider the following countries: (UPSC 2018)
1. Australia
2. Canada
3. China
4. India
5. Japan
6. USA
Which of the above are among the free-trade partners' of ASEAN?
A. 1, 2, 4 and 5 B. 3 , 4, 5 and 6 C. 1, 3, 4 and 5 D. 2, 3, 4 and 6
3. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if (UPSC 2018) (a) Industrial output fails to keep pace with agricultural output. 4. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (UPSC 2010)
Which of the above are the objectives of this Act? (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
5. A “closed economy” is an economy in which (UPSC 2011) (a) the money supply is fully controlled
6. Consider the following pairs:(UPSC 2016)
Community is sometimes mentioned in the news In the affairs of
1. Kurd Bangladesh
2. Madhesi Nepal
3. Rohingya Myanmar
Which of the pairs given above is/are correctly matched?
A. 1 and 2 B. 2 only C. 2 and 3 D. 3 only
7. With reference to the BIMSTEC, which of the following statements is/are true? (UPPSC 2022)
1. P. M. Narendra Modi addressed the 5th BIMSTEC Summit on 30th March 2022.
2. 5th Summit of BIMSTEC had been chaired by India.
Select the correct answer from the code given below:
A. Neither 1 nor 2
B. Both 1 and 2
C. Only 2
D. Only 1
8. Which of the following statement/s is/are true about the three-day international Seminar on 'Climate Smart Farming System' for BIMSTEC countries held during December 11-13, 2019? (UPPSC 2020)
1. It was held at Katmandu, Nepal.
2. It was aimed to have experience sharing for more resilience to climate change through an ecological approach to enable the improvement of tropical small-holding farming systems.
Select the correct answer from the codes given below:
A. Only 1 B. Only 2 C. Both 1 and 2 D. Neither 1 nor 2
9. The term 'Regional Comprehensive Economic Partnership; often appears in the news in the context of the affairs of a group of countries known as (UPSC 2016)
A. G20 B. ASEAN C. SCO D. SAARC
10. Recently, with which one of the following countries did India sign the 'Comprehensive Economic Partnership Agreement' ? (UPSC CAPF 2022)
A. Egypt B. Israel C. South Africa D. United Arab Emirates
Answers: 1-B, 2-C, 3-C, 4-A, 5- D, 6-C, 7-D, 8-B, 9-B, 10- D
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Source: The Hindu
FREE TRADE AGREEMENT
1. Context
The political turmoil in Bangladesh that deepened on Monday with Sheikh Hasina resigning as the country’s prime minister and flying out has raised concerns among Indian exporters, who see the ongoing political turmoil potentially leading to disruption in the flow of goods at the India-Bangladesh border and payment delays to Indian traders. There is, however, hope among traders that the situation may not take too long to normalise.
2. About the Free Trade Agreement
- A Free Trade Agreement (FTA) is an agreement between two or more countries to reduce or eliminate barriers to trade, such as tariffs, quotas, and subsidies.
- FTAs can also include provisions on other issues, such as investment, intellectual property, and labour standards.
- The goal of an FTA is to promote trade and economic growth between the signatory countries.
- By reducing or eliminating trade barriers, FTAs can make it easier for businesses to export their goods and services to other countries, which can lead to increased production, employment, and innovation.
3. Types of Free Trade Agreement
- Bilateral Free Trade Agreement (BFTA) involves two countries, aiming to promote trade and eliminate tariffs on goods and services between them. It establishes a direct trade relationship, allowing for a more focused and tailored agreement between the two nations.
- Multilateral Free Trade Agreement (MFTA) Involving three or more countries, an MFTA seeks to create a comprehensive trade bloc, promoting economic integration on a larger scale. It requires coordination among multiple parties, addressing diverse economic interests and fostering a broader regional economic landscape.
- Regional Free Trade Agreement (RFTA) involves countries within a specific geographic region, aiming to enhance economic cooperation and integration within that particular area. It focuses on addressing regional economic challenges and fostering collaboration among neighbouring nations.
- Preferential Trade Agreement (PTA) involves a reciprocal reduction of tariffs and trade barriers between participating countries, granting preferential treatment to each other's goods and services. It allows countries to enjoy trading advantages with specific partners while maintaining autonomy in their trade policies with non-participating nations.
- Comprehensive Economic Partnership Agreement (CEPA) is a broad and advanced form of FTA that goes beyond traditional trade barriers, encompassing various economic aspects such as investment, intellectual property, and services. It aims for a more comprehensive economic partnership, encouraging deeper integration and collaboration between participating countries.
- Customs Union While not strictly an FTA, a Customs Union involves the elimination of tariffs among member countries and the establishment of a common external tariff against non-member nations. It goes beyond standard FTAs by harmonizing external trade policies, creating a unified approach to trade with the rest of the world.
- Free Trade Area (FTA) with Trade in Goods (TIG) and Trade in Services (TIS): Some FTAs specifically emphasize either trade in goods or trade in services, tailoring the agreement to the specific economic strengths and priorities of the participating countries. This approach allows nations to focus on areas where they have a comparative advantage, fostering specialization and efficiency.
4. India's Free Trade Agreements
India is a member of several free trade agreements (FTAs) and is currently negotiating others. India's FTAs have helped to reduce trade barriers and promote trade and economic growth. They have also helped to attract foreign investment and create jobs.
- The South Asian Free Trade Agreement (SAFTA) was signed in 1995 by the seven countries of the South Asian Association for Regional Cooperation (SAARC). SAFTA aims to reduce or eliminate tariffs on trade between the member countries.
- The India-Bangladesh FTA was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Sri Lanka FTA was signed in 1999 and came into force in 2000. It is a comprehensive FTA that covers goods, services, and investments.
- The India-ASEAN Free Trade Agreement was signed in 2002 and came into force in 2010. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Korea Comprehensive Economic Partnership Agreement (CEPA) was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Japan Comprehensive Economic Partnership Agreement(CEPA) was signed in 2022 and came into effect in 2023. It is a comprehensive FTA that covers goods, services, and investments.
- The India-UAE Comprehensive Partnership Agreement (CEPA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Australia Economic Cooperation and Trade Agreement (ECTA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Malaysia Comprehensive Economic Cooperation Agreement (CECA) was signed in 2010 and aims to enhance economic ties by addressing trade in goods and services, as well as investment and other areas of economic cooperation.
- The India-Thailand Free Trade Agreement was signed in 2003 and focuses on reducing tariffs and promoting trade in goods and services between India and Thailand.
- The India-Singapore Comprehensive Economic Cooperation Agreement (CECA) has been operational since 2005, this agreement covers trade in goods and services, as well as investment and intellectual property.
- The India-Nepal Trade Treaty While not a comprehensive FTA, India and Nepal have a trade treaty that facilitates the exchange of goods between the two countries.
- The India-Chile Preferential Trade Agreement was signed in 2006 and aims to enhance economic cooperation and reduce tariffs on certain products traded between India and Chile.
5. India - UK Free Trade Agreement
5.1. Background
- Both countries have agreed to avoid sensitive issues in the negotiations.
- The interim (early harvest agreement) aims to achieve up to 65 per cent coverage for goods and up to 40 per cent coverage for services.
- By the time the final agreement is inked, the coverage for goods is expected to go up to "90 plus a percentage" of goods.
- India is also negotiating a similar early harvest agreement with Australia, which is supposed to set the stage for a long-pending Comprehensive Economic Cooperation Agreement that both countries have been pursuing for nearly a decade.
- While the commencement of negotiations does mark a step forward in the otherwise rigid stance adopted and when it comes to trade liberalisation, experts point to impediments and the potential for legal challenges going ahead.
5.2. GATT (General Agreement on Trade and Tariffs)
- The exception to the rule is full-scale FTAs, subject to some conditions.
- One rider, incorporated in Article XXIV.8 (b) of GATT, stipulates that a deal should aim to eliminate customs duties and other trade barriers on "Substantially all the trade" between the WTO member countries that are signatories to an FTA.
- For this Agreement, a free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
- It is often beneficial to negotiate the entire deal together, as an early harvest deal may reduce the incentive for one side to work towards a full FTA.
- These agreements are not just about goods and services but also issues like investment.
- If you are trying to weigh the costs and benefits, it is always better to have the larger picture in front of you.
- In the case of the early harvest agreement inked with Thailand, automobile industry associations had complained that relaxations extended to Bangkok in the early harvest had reduced the incentive for Thailand to work towards a full FTA.
- Early harvest agreements may serve the function of keeping trading partners interested as they promise some benefits without long delays, as India becomes known for long-drawn negotiations for FTAs.
- Government emphasis on interim agreements may be tactical so that a deal may be achieved with minimum commitments and would allow for contentious issues to be resolved later.
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For Prelims: Free Trade Agreement, India-U.K, Bilateral Free Trade Agreement, G-20 Summit, Agenda 2030, Covid-19 Pandemic, SAARC, General Agreement on Trade and Tariffs, Comprehensive Economic Partnership Agreement, Multilateral Free Trade Agreement, Regional Free Trade Agreement, Preferential Trade Agreement, Customs Union,
For Mains:
1. Evaluate the potential impact of the India-UK FTA on the Indian economy, considering both positive and negative aspects (250 Words)
2. Critically evaluate the significance of Free Trade Agreements (FTAs) in promoting trade and economic growth, considering their potential benefits and drawbacks. (250 Words)
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Previous Year Questions
1. Consider the following countries:
1. Australia
2. Canada
3. China
4. India
5. Japan
6. USA
Which of the above are among the free-trade partners' of ASEAN? (UPSC 2018)
A. 1, 2, 4 and 5 B. 3, 4, 5 and 6 C. 1, 3, 4 and 5 D. 2, 3, 4 and 6
Answer: C
2. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if (UPSC 2018) (a) Industrial output fails to keep pace with agricultural output. Answer: C 3. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (2010)
Which of the above are the objectives of this Act? (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3 Answer: A 4. A “closed economy” is an economy in which (UPSC 2011) (a) the money supply is fully controlled Answer: D 5. With reference to the “G20 Common Framework”, consider the following statements: (UPSC 2022)
1. It is an initiative endorsed by the G20 together with the Paris Club. 2. It is an initiative to support Low Income Countries with unsustainable debt. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: C
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Source: The Hindu
UNEMPLOYMENT IN INDIAN STATES
1.Context
Between 70-85 per cent of currently employed youth in rural areas desire to change their jobs, the ‘State of Rural Youth Employment Report 2024’ has found. The report also indicated that agriculture and self-employment, traditionally key sources of rural labour absorption, are no longer seen as aspirational career paths by many young people in rural India
2. What is Unemployment?
Unemployment refers to a situation where individuals who are willing and able to work at prevailing wage rates are unable to find jobs.
In other words, it represents a condition where people are actively seeking employment but are currently without work.
Unemployment can occur due to various reasons, including economic downturns, technological changes, mismatch of skills between job seekers and available jobs, and structural issues within the labour market.
Unemployment is typically measured by the unemployment rate, which is the percentage of the labour force that is unemployed and actively seeking employment
3. An analysis of unemployment
- Goa's unemployment rate stands at nearly 10%, surpassing the national average of 3.17% by more than threefold. It's notable that four of the top five states with high unemployment rates—Goa, Kerala, Haryana, and Punjab—are relatively affluent. In contrast, Maharashtra and Gujarat in western India, both prosperous states, report unemployment rates considerably below the national average.
- Across northern states like Jammu and Kashmir, Punjab, Haryana, Uttarakhand, and Himachal Pradesh, unemployment rates exceed the national average. Similarly, most southern states, except Karnataka, also have higher than average unemployment rates.
- Among the 27 states examined, 12 have unemployment rates lower than the national average. Notably, the low rates in significant states such as Maharashtra, Uttar Pradesh, and Madhya Pradesh contribute to this national average decline.
- However, it's puzzling that except for Maharashtra and Gujarat, states with below-average unemployment rates generally exhibit lower per capita incomes compared to the national average
4.The determinants of unemployment
- The data reveals a downward-sloping trend line, suggesting a negative correlation between the two factors: in states where a significant portion of the workforce is involved in self-employment, the unemployment rate tends to be lower.
- Given that much of self-employment in India is informal, states with a higher prevalence of informal work may find it easier to accommodate job seekers.
- However, it remains uncertain whether this relationship is causal. Does a lack of opportunities in self-employment lead to higher unemployment, or do individuals in states with high unemployment rates simply prefer not to pursue self-employment?
- A considerable portion of informal self-employment stems from agriculture and rural economies.
- Hence, a relevant measure is to analyze the proportion of the workforce engaged in urban sectors.
- A clear positive correlation emerges, indicating that unemployment rates rise in states with higher urbanization levels.
- This elucidates the elevated unemployment levels in highly urbanized states like Goa and Kerala, juxtaposed with lower rates in states such as Uttar Pradesh, Jharkhand, and Madhya Pradesh. Urbanized states typically possess smaller agrarian sectors, leading to fewer informal job opportunities compared to rural areas.
- Although informal sectors persist in urban settings, their capacity to absorb job seekers is relatively limited compared to rural agriculture, which often serves as a reserve by absorbing surplus labour
5. Education and employment
- However, there are exceptions to this pattern. Gujarat and Maharashtra, despite being highly urbanized—where the urban workforce comprises 37% in both states, significantly higher than in states like Uttar Pradesh (17%) and Madhya Pradesh (20%)—exhibit lower unemployment rates.
- Following the release of the ILO-IHD report, much discourse has revolved around the correlation between education levels and unemployment.
- A previous article in this publication dated December 26, 2023, titled 'Are graduates facing unemployment?', also delved into the prevalent issue of unemployment among graduates.
- For instance, Kerala boasts a highly educated workforce, with graduates constituting 30% of the labor force, yet it contends with high unemployment.
- Conversely, Gujarat and Maharashtra have a relatively smaller proportion of graduates in their workforce—approximately 14% and 20% respectively—and consequently experience lower unemployment rates despite their affluence and urbanization.
- Numerous factors may account for this phenomenon.
- It's plausible that graduates lack the necessary skills demanded by the burgeoning modern sector, underscoring the need to enhance educational infrastructure and standards.
- However, this doesn't fully elucidate why graduates have historically grappled with unemployment, even during the nascent stages of the modern sector.
- Another potential explanation lies in aspirational factors. Graduates aspire to secure high-paying jobs commensurate with their skills, rather than settling for informal employment.
- If the modern sector fails to expand adequately to absorb new graduates, it could precipitate unemployment.
- Nonetheless, these aren't the sole drivers of unemployment; state policies also wield significant influence. Nevertheless, this analysis underscores the interconnectedness between structural shifts and unemployment.
- As burgeoning economies evolve, there's a diminishing reliance on agriculture, accompanied by heightened urbanization and educational attainment.
- As India progresses, these factors are anticipated to exert upward pressure on the unemployment rate. Thus, it's imperative for policy initiatives to prioritize employment generation to counteract these trends
6. Way Forward
Additionally, states with significant rural populations, such as Uttar Pradesh, Bihar, and Madhya Pradesh, may experience higher unemployment rates due to limited job opportunities outside of agriculture and a lack of sufficient infrastructure for industrial development
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For Prelims: Labor Force Participation Rate (LFPR), Employment Rate (ER), Centre for Monitoring Indian Economy (CMIE), and Labour Force.
For Mains: 1. Discuss the significance of the Labor Force Participation Rate (LFPR) as a critical labor market indicator in the context of economic development and policy formulation. (250 words).
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Previous year Question1. In India, which one of the following compiles information on industrial disputes, closures, retrenchments, and lay-offs in factories employing workers? (UPSC 2022)
A. Central Statistics Office
B. Department for Promotion of Industry and Internal Trade
C. Labour Bureau
D. National Technical Manpower Information System
Answer: C
2. Which of the following brings out the 'Consumer Price Index Number for Industrial Workers'? (UPSC 2015)
A. The Reserve Bank of India
B. The Department of Economic Affairs
C. The Labour Bureau
D. The Department of Personnel and Training
Answer: C
3. International Labour Organization's Conventions 138 and 182 are related to (UPSC 2018)
A. Child labour
B. Adaptation of agricultural practices to global climate change
C. Regulation of food prices and food
D. Security
Answer: A
4. Which of the following statements about the employment situation in India according to the periodic Labour Force Survey 2017-18 is/are correct? (UPSC CAPF 2020)
1. Construction sector gave employment to nearly one-tenth of the urban male workforce in India.
2. Nearly one-fourth of urban female workers in India were working in the manufacturing sector.
3. One-fourth of rural female workers in India were engaged in the agriculture sector.
Select the correct answer using the code given below:
A. 2 only
B. 1 and 2 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: B
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Source: The Hindu
