Today’s important articles/news in various newspapers (7th May)

Dear aspirants, following are the links of various articles taken from various newspapers. Click the link to read further. To get notification, follow the blog. Thank you

1. GST’s complicated- The Hindu

Many taxes has been subsumed under GST which are as under:

There are some gaps in the new compliance system

  1. For instance, in the second stage of the transition to simpler returns, buyers will get provisional input credit even if the seller doesn’t upload the invoices
  2. While this could lead to disputes, in the third stage input credits will only be granted after sellers upload invoices
  3. But if a seller defaults on depositing GST dues collected from a buyer and remains evasive, the authorities can reverse the credit availed by the buyer for such outstanding taxes

Fresh uncertainty for businesses: Issue with the timeline

  1. In any case, the timelines for the transition are long and bring fresh uncertainty for businesses still recovering from the initial jitters and confusion around the tax regime
  2. Firms will again have to cope with significant changes in accounting software in the middle of the financial year

Imposition of new cess

  1. The most troubling is the Centre’s push for the imposition of a cess on sugar over and above the 5% GST levied on it
  2. A cess at the rate of Rs. 3 a kg is proposed to alleviate ‘deep distress’ among sugarcane farmers. Not surprisingly, this faces opposition from several States
  3. It has been rightly argued that this will burden consumers while favouring larger sugarcane-growing States like U.P. and Maharashtra

The decision to make the GSTN a 100% government-owned firm

  1. The decision explains neither how this will address data security concerns nor the impact on the Network’s functional efficiency, which was the original stated intent for giving private players an upper hand in operations

2. Adult couple can live together, says SC

An adult couple has a right to live together without marriage, the Supreme Court said, while asserting that a 20-year-old Kerala woman, whose marriage had been annulled, could choose whom she wanted to live with.

The top court held that live-in relationships were now even recognised by the legislature and they had found a place under the provisions of the Protection of Women from Domestic Violence Act, 2005.

3. Defying the logic of democracy

Simultaneous polls will prevent citizens from keeping their elected representatives on permanent notice.

  1. The implications of holding simultaneous elections to the Parliament and State Assemblies run contrary to the spirit of democracy, as well as that of federalism.
  2. In other countries we have seen the rhetoric of governance replace the logic of democracy. We have arrived at the same juncture.
  3. Arguments that juxtapose governance and democracy simply overlook the fact that governance is about administration, democracy is about popular sovereignty.
  4. We expect governments to give us good governance, but not at the cost of democracy.
  5.  Democracy, for instance, enables a peaceful transfer of power from one political elite to another. It is, relatively speaking, more economical than authoritarian governments, which spend an inordinate amount of money in suppressing dissent.
  6.  The idea that democracy is valuable because it secures a designated good, however, poses a dilemma. If tomorrow a benevolent despot provides these goods, is democracy dispensable?
  7. Arguably, democracy is a good because it initiates, fosters and sustains a conversation between the rulers and the ruled. Elections constitute definitive moments in this conversation. They (a) enable the selection of candidates who will speak for and to the citizens; and (b) allow citizens to hold representatives responsible.
  8. In between elections, citizens can hold the rulers responsible for all acts of omission and commission through participation in movements, campaigns and other modes of representation in civil society. Citizens and their representatives thus engage in permanent conversations.
  9. Elections facilitate and develop the conversation between citizens and representatives. Elections are not equivalent to democracy; they are a definitive component of the democracy project.
  10. Unlike direct democracy, modern democracies are based upon the principle of representation. All elected representatives ‘stand in’ for their constituents in legislatures, but the responsibility of the ruling party is much more. It has to represent the interests of even those citizens who did not vote for it.
  11. Under the proposed scheme, if the government fails to heed the mandate given by citizens, but the Opposition cannot offer an alternative government, and elections cannot be held before the stipulated time, the government will continue to rule, but illegitimately. This is the conundrum of simultaneous elections.
  12. In large and unwieldy societies like India, citizens should be able to distinguish between national issues, for example foreign policy and defence, and local issues that affect their quotidian lives, lack of education and health, the pathetic state of roads and water bodies, provision of infrastructure, and ease of living one’s life in relative autonomy from political intervention.
  13. The case for a federal form of government is constructed precisely on the need for decentralised power, decentralised finances, and accessible governments.
  14. Across the world the trend is towards regional autonomy. In India where this demand has acquired serious proportions in many parts of the country, any push towards the standardisation of elections will exacerbate the problem.
  15. Citizens are stake-holders in the political system — therefore, they have the right to participate in processes of decision-making that affect them individually and collectively. Participation in national and State elections expands the spaces of citizenship.
  16. If citizens have a right to exercise control on the representative, or the political party of which she is a part, they should be given an opportunity to do so through frequent elections.

4. Continental ambition

The African Continental Free Trade Area (ACFTA) is a potential game changer for the world’s poorest region. The pact — signed by 44 of the 55-member African Union (AU) in March — seeks to create a single market in goods and services, free movement of persons and investment, and eventually a customs union with a common external tariff.

Image result for The African Continental Free Trade Area


5. The last child first

To address violence against women and child sexual abuse, entrenched hierarchies and the approach to justice must be overturned.

Image result for POCSO ACT

6. Rupee is dancing to more tunes this year

Menacing threats include rupee overvaluation, rising CAD, an ebb in capital flows and macroeconomic populism.

Rupee is dancing to more tunes this year


  • The Indian currency has been facing some selling pressure for the last 4-5 weeks, chiefly on the back of rising crude price. The rupee fell against the U.S. dollar by a little over 2.5% in April, and 4.3% since the beginning of the year, making it the worst-performing Asian currency.

U.S. dollar recovering

  • And this has come at a time when the U.S. dollar seems to be on a cyclical recovery path against other major currencies on the relative strength of the U.S. economy. On all such occasions in the past, the rupee as well as the capital account of the country’s Balance of Payments came under pressure.
  • But this repeat of history now has other elements that compound the overall external sector vulnerability: overvalued rupee, rising current account deficit, sudden ebb in capital inflows and certain developments in the domestic political economy policy front.
  • Going by its 36-country trade-weighted real exchange rate index, the rupee is currently overvalued by more than 17% relative to 2005. The movement of this index over the last few years provides some interesting insights: the real effective exchange rate of the rupee has gone up by about 4.73% since 2015-16, but it remained flat in 2017-18, although the nominal effective exchange rate of the U.S. dollar fell by about 9% during that period.
  • The table alongside illustrates this point. This highlights the structurally higher inflation in India not just in relation to the U.S., but vis-a-vis all its major trading partners and competitors as well.
  • RBI expects CPI inflation to lie between 4.4%-5.1% during the current fiscal year, with higher inflation expected in the first half. For the purpose of this estimate, RBI has assumed an average oil price of $68 per barrel. If global prices turn out to be higher than this, then the inflation will be higher. With the benchmark Brent having already touched a high of $75 per barrel, the possibility of inflation crossing 5% in the coming months is high.
  • The moot point here is that the inflation differential between India and most of the major trading partner countries is close to 3%, which explains the sustained real appreciation of the rupee.
  • In the past, real exchange rate appreciation would lead to abrupt and large changes in the nominal exchange rate of the rupee against the U.S. dollar, often triggered by domestic macro/political and global economic developments, the latest example being the burst of sharp depreciation of the rupee in August-September, 2013 caused by the so-called ‘taper tantrum’ announcement by the Federal Reserve to curtail its quantitative easing programme.

Rising wages

  • The significant real appreciation of the rupee calls for a deeper probe as regards its causes and consequences for trade competitiveness. First, labour productivity has increased at an average rate of 6.3% annually since 2005, which is way higher than the annual average of 3.3% recorded in the previous 12 years.
  • We need further research to determine if the consequent wage rise led to higher inflation, real appreciation and increase in current account deficit within the theoretical framework of Balassa-Samuelson Effect.
  • As regards the consequence of the real appreciation of the rupee, it needs to be ascertained if any increase in factor productivity in the tradeable sector has cushioned its adverse impact on the competitiveness of the country’s goods and services.
  • This is crucial for the purpose of guiding exchange rate policies of RBI and the government. India’s current account deficit increased to 1.9% of GDP in April-December 2017 from 0.7% in the corresponding period of 2016-17 on the back of about 44% widening of the trade deficit during this period.
  • While the country’s imports relative to its GDP is now much lower than the peak level reached in 2012-13, the performance of exports continues to be lacklustre. In the financial year 2013-14, exports were 17.2% of GDP and by the financial year 2016-17, the ratio fell to 12.4% of GDP.
  • In the traditional areas of exports, such as garments and textiles, where India was second only to China, the country now occupies third position in textiles and fifth position in garments.
  • The case of garments exports is interesting as in 2000 the share of clothing exports as a percentage of total global clothing exports of Bangladesh, Vietnam and India was 2.6%, 0.9% and 3% respectively. By 2016, while India’s share of global clothing exports has increased marginally to 4%, Bangladesh has improved its share to 6.4% and Vietnam’s share is a stellar 5.5%.
  • This is a pointer to India’s inability to gain market share in a global business which is consolidating among the top ten countries. Despite the claims of ‘Make in India’, India does not yet figure among the top ten exporters of manufactured goods.
  • China now exports manufactured goods worth $2 trillion (almost equal to India’s GDP) and its share of global exports of manufactured goods increased from 4.7% in 2000 to 17.9% in 2016.
  • The silver lining in India’s current account in the past has been the export of services export. Indian IT services companies, which followed a low-cost global delivery model with success in the past, have not succeeded so far in graduating to the new world of artificial intelligence, machine learning and robotics.
  • In the first half of the financial year 2017-18, growth in IT services exports compared to the corresponding period in 2016-17, was a meagre 2.3%. Growing trade protectionism in the West will certainly slow down the growth of exports of IT and IT-enabled services, unless Indian companies move up the value chain. Tourism and transfers from migrant workers in the Gulf have remained robust.
  • India’s gold import, which was $56 billion in 2011-12, declined 52% to $27 billion in 2016-17. However, a rising trend of gold import is now being seen, with the import in 2017 at 855 tonnes — a 67% rise over the previous year,
  • The other worrisome trend is the rapid growth in imports of electronic goods, which was $3.4 billion in 2011-12 and $42 billion in 2016-17 — a massive 12-fold increase in five years.
  • There is a distinct possibility that imports of electronic imports, mostly from China, will surpass oil imports in the near future.The rising trend of import of gold and white goods could very well be a manifestation of the rupee’s overvaluation.
  • The FDI and portfolio flows in the first nine months of 2017-18 remained robust. But, a decline in portfolios flows is taking place now, as evidenced by an outflow of $2 billion in April. Foreign exchange reserves at $424 billion, with another $22 billion in forward purchase, look formidable to be able to quell any market volatility.
  • But, as before, the leeway to spend the reserves is not unlimited and decline in foreign currency assets is already happening. Further, applying IMF’s metric of reserves adequacy, the safe level of foreign exchange reserves for India turns out to be $496 billion.

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