DAILY MAINS NEWSLETTER FOR UPSC | 12 MAY 2021|RaghukulCS

Daily Mains Newsletter For UPSC
| RaghukulCS

12 May 2021

Index

Mains Value Addition

Mains Analysis

Topic No

Topic Name

Source

1

Evaluate the Ladakh crisis, keep China at bay

The Hindu

2

The debate over vaccine GST exemption

Indian Express

Mains Value Addition

China’s population growth slows to lowest rate in decades

Syllabus -GS 1: Population and associated issues

Analysis: –

  • China’s once-in-a-decade population census has recorded a slowing population growth rate that will likely see China’s population peak – and be overtaken by India’s – by as early as 2025, experts said, with the number of births falling for the fourth consecutive year.
  • The seventh census, released on Tuesday by the National Bureau of Statistics (NBS) in Beijing, noted 12 million babies were born last year, the lowest number since 1961, a year when China was in the midst of a four-year famine unleashed by Mao Zedong’s Great Leap Forward policy in 1958 that devastated the farm sector and claimed millions of lives.
  • China’s population was 1.41 billion in 2020, according to the census, increasing by 72 million since the last census in 2010, recording a 5.38% growth in this period. The average annual growth was 0.53%.
  • The slowing growth rate, a consequence of China’s stringent family planning rules over decades – known as the “one-child policy” but involving a range of varying restrictions across urban and rural areas – has evoked concerns of a rapidly ageing society and the impact on China’s labour force, and fears that China will, as some experts have said, “get old before it gets rich.”
  • The census recorded 264 million in the age group of 60 and over, up 5.44% since 2010 and accounting for 18.70% of the population. Those in the 15-59 age group were 894 million persons, down by 6.79% since 2010 and accounting for 63.35% of the population.

Mains Analysis

Evaluate the Ladakh crisis, keep China at bay

Why in News?

Ladakh crisis offer 3 India key lessons to in managing the intensifying strategic competition with China.

Syllabus–GS 2: international Relations

  • In a recent study published by the Lowy Institute — The crisis after the crisis: how Ladakh will shape India’s competition with China — this writer has argued that the Ladakh crisis offers New Delhi three key lessons in managing the intensifying strategic competition with China.
  • Over more than a year, the standoff between India and China at Eastern Ladakh region didn’t find any solution.
  • No output came from the series of talks held by the two nations over the issue. It is resulted in lowering the bilateral relations between two countries.
  • Recently, India’s External Affairs Minister S. Jaishankar has made clear, the relationship is conditional on quietude on the border.

Revamping strategies

-Military strategies based on denial are more useful than strategies based on punishment.

-Military’s standing doctrine calls for deterring adversaries  which did not prevent Chinese incursion but the Indian military’s highwater mark in the crisis was an act of denial — its occupation of the heights on the Kailash Range on its side of the LAC in late August.

-This action served to deny that key terrain to the Chinese People’s Liberation Army (PLA), and gave the Indian Army a stronger defensive position from which it could credibly defend a larger segment of its front line.

-By bolstering India’s defensive position, rather than launching an escalatory response, such a strategy is also more likely than punishment to preserve crisis stability.

-Over time, improved denial capabilities may allow India to reduce the resource drain of the increased militarisation of the LAC.

 Political costs

-China is more likely to be deterred or coerced with the threat of political costs, rather than material costs.

-A permanently hostile India or an accidental escalation to conflict were risks that China, having achieved its tactical goals in the crisis, assessed were an unnecessaryadditional burden while it was contending with the instability of its territorial disputes andpandemic response.

-To the extent that China adjusted its position in the Ladakh crisis, it did so because it was responding to the cumulative effect of multiple pressure points — most of which were out of India’s control.

– Against the rising behemoth, only coordinated or collective action is likely to be effective.

 Indian Ocean Region is key

-India should consider accepting more risk on the LAC in exchange for long term leverage and influence in the Indian Ocean Region.

-At the land border, the difficult terrain and more even balance of military force means that each side could only eke out minor, strategically modest gains at best.

– In contrast, India has traditionally been the dominant power in the Indian Ocean Region and stands to cede significant political influence and security if it fails to answer the dizzyingly rapid expansion of Chinese military power.

– Ladakh crisis prompt India to defer long overdue military modernisation and maritime expansion into the Indian Ocean.

 Way Forward –

  • As a result of the Ladakh crisis, India faces a new strategic reality in which China is a clear and abiding adversary.
  • For India, the political relationship is now defined by hostility and distrust, and the LAC will remain more heavily militarised and violence-prone.
  • Given this new reality, India is likely to further defer military modernisation and maritime expansion into the Indian Ocean.
  • In the face of unremitting Chinese naval expansion, India risks losing significant political and military leverage in the Indian Ocean.
  • At the same time, China appears to have escaped significant harm. Its better-resourced military could better absorb the material costs of the mobilisation.
  • It may have been more concerned by the prospect of an increasingly hostile India, but the disengagement agreement has limited even those modest political costs.
  • The central policy challenge for India is balancing the heightened Chinese military threat on the northern border with the rapidly growing Chinese military presence in the Indian Ocean.
  • It can manage this challenge by focusing on military strategies of denial rather than punishment, focusing on imposing political rather than material costs on China, and accepting more risk at the LAC in exchange for long-term leverage in the Indian Ocean region.
  • How India responds will shape not only its strategic competition with China, but also the interests of likeminded partners including Australia, which depend on an increasingly capable and active India.

Question: –

Discuss how rebalancing India’s strategic priorities will require the central government to issue firm strategic guidance to the military services which will overcome entrenched bureaucratic and organisational cultural biases.

The debate over vaccine GST exemption

Why in News?

Issue of vaccine exemption from GST

Syllabus– GS3: Indian Economy & Taxation related issues.

  • Finance Minister Nirmala Sitharaman on Sunday launched a staunch defence of the GST levies on COVID-19 relief supplies after West Bengal Chief Minister Mamata Banerjee wrote to Prime Minister Narendra Modi mooting an exemption from these taxes amid the pandemic’s escalating second wave.
  • The Finance Minister had said that exemption to vaccine from GST would be counterproductive without benefiting the consumer.

GST amidst COVID-19

  • An array of measures including reduction in GST rates, zero GST rate on critical raw materials, permitting GST-free imports as well as direct cash incentives to producers, can be used by the Centre to make COVID-19 vaccines and other critical supplies cheaper, tax experts have suggested.
  • At present, Goods and Services Tax is levied at the rate of 5% on vaccines and 12% on COVID-19 drugs and oxygen concentrators for domestic supplies and commercial imports.
  • For oxygen concentrators imported for personal use, the government has reduced GST rate from 28% to 12% and waived customs duties.

Vaccine and GST in India: –

  • Vaccines attract 5% GST and drugs (Covid drugs and oxygen concentrators) attract a 12% GST.
  • The case to lower GST on drugs is compelling. The other option is zero rating of vaccines and drugs — just as exports — to keep the chain unbroken, the retailer collects zero rate of GST from the consumer and collects input tax credit.
  • However, the tax payout is not a major consideration from a patient’s point of view.

Better option

  • A taxation expert, on condition of anonymity, said reducing the GST on final products as well as raw materials, or zero-rating supplies, would be a better option than an outright GST exemption.
  • Saket Patawari, executive director (indirect tax) at advisory firm Nexdigm, said the government could take measures to slash costs, including a possible special incentive scheme to refund taxes, outside the ambit of the GST law.
  • “A concessional GST rate of 1% can be levied for COVID-19 vaccines.
  • Suppliers would be allowed GST credit benefit, which could be claimed as refund under an ‘inverted duty structure refund’, typically claimed by pharmaceutical companies,” Mr. Patawari said. Alternatively, the entire COVID-19-related supply chains could be taxed at 5%, he suggested.

Easing of imports

  • Experts have also called for easing of imports of critical medical equipment and materials by exempting them from Integrated GST, by putting end-use conditions in certain cases, if needed, to ensure they are not misused.
  • “Given the need for importing various COVID-related material for treatment and cure of patients, to augment current availability and to help people tide over the current shortage, a complete exemption to such material from the Integrated GST and other procedural requirements will help facilitate the import and clearance of such material,” Bipin Sapra, partner at consulting major EY, told The Hindu.

Possible Solutions: –

  • Grant a 100% abatement (reduction in the taxable value) to the manufacturer say for a period of two years without impacting the right to take credit of GST paid on procurement — this can be done by way of a notification issued post approval in the GST Council meeting.
  • Central and state governments can jointly introduce a scheme providing for rebate/refund to the manufacturers for GST paid on vaccines and not collect it from end consumer. This could be issued for a limited time-frame.
  • A low, uniform rate of import duty, say 5%, on all vaccines and their ingredients would protect the domestic industry, without burdening the vaccinated overmuch. In the long run, a robust, indigenous vaccine-making industry would lower the cost of healthcare for India.

Way Forward: –

  • In the event that we suddenly make COVID – 19 vaccines exempt, there will be an issue of the settling of the tax amount that has already been paid at previous stages of production – whether it be for raw materials, or for any other services required as a part of the production process.
  • Moreover, companies would find themselves holding sizeable inventory of such materials where they have already paid such a tax, and thus, by not allowing them to settle it against a final GST would only increase their costs.
  • Thus, vaccine manufacturers would be at a disadvantage should the government suddenly decide to make vaccines exempt as they would have to bear the cost of the taxes that have already been paid on their existing raw materials.
  • Further, future settlement of input tax credit also becomes difficult as GST would continue to be levied on critical raw materials.

 

Question: –

Several states have called for removing taxation on COVID-related medicines & supplies including a GST exemption on vaccines to help in removing supply constraints & contribute towards effective management of the COVID pandemic. Discuss.

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