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RaghukulCS
June 11, 2021

Daily Mains Newsletter For UPSC
| RaghukulCS

11 June 2021 - Friday

Index

Mains Value Addition
Mains Analysis
Topic No	Topic Name	Source
1	The rope of federalism and an unwanted tug-of-war	The Hindu
2	A plan to spend more	Indian Express

Mains Value Addition

In Nagaland, anti-graft group forms political party

Syllabus–GS 2: Pressure groups

Analysis: –

Members of a group that had stood up to “multiple taxations” by extremist groups such as the National Socialist Council of Nagaland (NSCN) factions have formed a political party.
The Rising People’s Party (RPP) was registered with the Election Commission of India on June 7.
Its president is Joel Naga, one of the founding members of Against Corruption and Unabated Taxation (ACAUT) that had “done the impossible” in 2013 by organising a mass movement against “taxes” imposed by at least half a dozen extremist groups.
The group had also taken on fuel adulteration and backdoor appointments in the State government departments.
One of the objectives of the RPP is to ensure that a woman gets into the Assembly. Nagaland had a lone woman MP in Rano Shaiza (1977-1980) but is yet to elect one to the 60-member House.
“Our basic goal is to change the system. But one can do that by entering the system as shouting and protesting from outside changes nothing,” Mr. Naga told journalists.
He said his party would be “realistic” about its prospects in view of the performance of two new political parties – the Assam Jatiya Parishad and the Raijor Dal – that did not live up to the pre-election hype.

Education Ministry releases AISHE report 2019-20, number of PhDs increased by 60% in last five years

Syllabus–GS 2: Education

Analysis: –

The Ministry of Education on Thursday released the All Indian Survey of Higher Education (AISHE) report 2019-20.
The report revealed that the number of Institutes of National Importance (INIs) have increased from 75 in 2015 to 135 in 2020. The number of PhDs has also increased by 60 per cent in the last five years.
As per the AISHE report 2018-19, BTech and MTech programmes had seen a dramatic fall. This led to an overall dip in enrolment in professional courses, which hit a four-year low.
Students pursuing a Master’s degree in technology had decreased by more than half in the last five years alone, from 2,89,311 in 2014-15 to 1,35,500 in 2018-19, according to AISHE 2018-19. B.Tech enrolment fell by 11 per cent in the same period, from 42,54,919 to 37,70,949.

Mains Analysis

The rope of federalism and an unwanted tug-of-war

Why in News?

The Centre-West Bengal controversy on the conduct of Bengal’s former Chief Secretary, has thrown up several political and administrative issues that deserve our attention for the future health of our federal polity.

Syllabus—GS 2- Federalism & Role of civil services in a democracy

Background: –

There are, no doubt, matters enunciated in our Constitution, where the Centre’s decisions have primacy over those of the State governments, but this does not extend to holding of meetings.

Relief and the third tier

Relief and rehabilitation work in the event of a natural calamity or management of a disaster is of a local nature and is carried out by the district, sub-divisional and village level officials working under the State governments.
Over time, the States have conceded space to the Centre for disaster management for getting financial, technical and logistical support.
The comprehensive framework under the Disaster Management Act, 2005 operates mainly at the State, district and local levels.
Conduct of an Indian Administrative Service (IAS) officer, must be seen in this overall context along with the central government’s reactions which together raise issues regarding the norms of civil service conduct, political and administrative arrogance and revengeful behaviour.

The services and fine balance

The All-India Services, , were conceived by the makers of our Constitution to provide uniformity and high standards of public service in both the Centre and the States, and to provide a measure of administrative unity in our diverse and plural society.
To ensure quality and as a measure of convenience, IAS officers are recruited by the Union Public Service Commission and formally appointed by the President of India.
But they are ultimately borne in State cadres which makes them subject to the control of the respective State governments as well, especially when they are in the employment of their States.
To that extent their position is somewhat different from that of the central services who go through similar recruitment procedures but are under the Centre’s total control.
The IAS officers work for the central government on “deputation” from their respective State cadres and during their central deputation, their loyalty is of course to the central government.
IAS officers will face acute trust-deficit, if while working for a State government, they show preferential allegiance or loyalty to central government functionaries.

High-handed approach

Action has been initiated against chief secretary (West Bengal)under Section 51(b) of the Disaster Management Act for failing to comply with the Centre’s direction to attend the review meeting taken by the Prime Minister.
This author writes that this an absurd interpretation of the provision that is meant to deal with cases of defiance of the lawful orders or action of the competent authorities under the Act.

Way Forward: –

It is very unfortunate that for some inexplicable reasons, a mountain has been made of a molehill, as the cliché goes. In these circumstances one misses the sagacity, wisdom and sophistication of some of our tall political leaders who steered the destiny of our nation in the past.

Questions: –

India is a ‘union of states’ and in this union, the State governments are not subordinate agencies of the central government.Discuss.

A plan to spend more

Why in News?

C Rangarajan, D K Srivastava write: A word of caution, though: With higher expenditure, financed through borrowings, the impact of liquidity expansion on inflation needs to be monitored.

Syllabus—GS3: Budget & Fiscal Policy related

The Real GDP:

Recent NSO’s provisional estimates for 2020-21, show that the Indian economy witnessed an annual contraction of 7.3% in real GDP.
And a real GDP growth of 7.8% would be required in 2021-22 to reach back to 2019-20 real GDP levels.
The adverse impact of the 2nd wave of the pandemic is taken into account to re-examine the 2021-22 GDP growth.
RBI has revised its 2021-22 real GDP growth forecast to 9.5%.
Moody’s& Societe Generale projected the lower side of growth that is 7.6% & 8.5% respectively.
If govt implements a suitable policy & lockdown wind-up by July, 9% real GDP growth is still feasible.

The Nominal GDP:

It is equally important to consider nominal GDP growth for 2021-22 because it would be a critical determinant of fiscal prospects.
Due to supply-side & cost-push pressures, the RBI has projected CPI inflation at 5.1% & the Implicit Price Deflator is 4%.
Thus, the nominal GDP growth may be projected at 13.4% which is 1% lower than the Centre’s budget assumption of 14.4%.

Tax Revenue:

According to Controller General of Accounts data for 2021-22., the center’s fiscal aggregates indicate a gross tax revenue (GTR) of Rs 20.2 lakh crore & net tax revenue of Rs 14.2 lakh crore.
The growth in GTR for 2021-22 was derived by applying a buoyancy of 0.9.
This gives for 2021-22, a tax revenue growth of 12% & the projected gross & net tax revenues would be Rs 22.7 lakh crore & Rs 15.8 lakh crore respectively.
That is additional net tax revenue to the Centre amounting to Rs 0.35 lakh crore.

Non-Tax Revenue:

The main shortfall is expected to be in non-tax revenue & non-debt capital receipts, their 2020-21levles are Rs 2.1 lakh crore & Rs 0.57 lakh crore respectively.
An estimated growth rate of 15% of these will result in a Rs 1.3 lakh crore shortfall in 2021-22.
During the last 5 years, the growth rates of non-tax revenues & non-debt capital receipts have been volatile but remained together averagely less than 15%.
For 2021-22, the large budgeted growth in non-debt capital receipts seems unlikely due to the 2nd wave-induced challenges.
With RBI’s recent announced dividend of Rs 0.99 lakh crore to the centre, the overall shortfall in total non-debt receipts is limited to 0.4% of estimated Nominal GDP.
This indicates that slippage in the budgeted fiscal deficit of 6.7% of GDP could be a limited one.

The Economic Challenges:

An increase in the provision for income support measures for the vulnerable rural & urban population.
Which requires Rs 1 lakh crore that can be partly provided through expenditure restructuring.
The decision to vaccination all would cost more than or double the budgeted expenditure of Rs 0.35 lakh crore.
Additional expenditure for select sectors like healthcare costs another Rs 1 lakh crore.
Together, these expenditures amount to Rs 1.7 lakh crore or 0.8% of the estimated nominal GDP.
Thus centre needs to plan for a fiscal deficit of 7.9% GDP consisting of
- 7% budgeted FD,
- 4% Shortfall in total-debt receipts,
- 8% for additional stimulus measures.

Govt efforts:

Centre announced borrowings of Rs 1.6 lakh crore to meet the shortfall in the GST compensation cess, which is not counted as the FD part.
Given the higher FD, the centre needs total Rs 16.3 lakh crore borrowing including GST compensation.
With additional borrowing by states would further make the situation worse.
In this unprecedented borrowing programme, the Center needs RBI’s support.
Currently, RBI is indirectly monetizing centers’ debt by injecting liquidity into the system through various channels.
Govt & RBI are keen to keep the interest rate low despite heavy borrowing.
The household sector’s demand for financial assets may not increase & the external sector’s demand for Indian sovereign bonds may also lukewarm.
In this scenario, RBI’s support for the Centre makes the borrowing programme successful.
According to monetary statements, RBI is injecting liquidity into the system in a big way.
The growth rate in reserve money is 12.4%.
But the injection so far is modest with M3 growth at 9.9% & the money multiplier is low.

Way Forward: –

In the Inflation discussion, focus on supply availability & bottlenecks in the distribution of commodities & output gap is relevant. But equally relevant in the analysis of inflation is liquidity in the system & its impact on output & prices with lags.

The liquidity injections have its limits & it is necessary to keep in mind the implications that liquidity expansion will have for inflation during govt spending expansion.

Question: –

On May 31, important updates regarding India’s GDP growth and the Centre’s fiscal performance for 2020-21 became available. According to NSO’s provisional estimates for 2020-21, the annual contraction in real GDP turned out to be 7.3 per cent, an improvement over the earlier estimate of 8 per cent. Enlist the economic challenges of India.