Daily Current Capsules - 04^th February 2020

Economic Development
Key Highlights of Economic Survey 2019-20 and Budget 2020-21(PART - II)
The government aims to

• Achieve seamless delivery of services through Digital governance
• Improve physical quality of life through National Infrastructure Pipeline
• Mitigate Risks through Disaster Resilience
• Boost Social security through Pension and Insurance penetration.

Budget and Economic Survey ( Important Takeaways)

Centre government Expenditure

• A good part of the borrowings for the financial year 2020-21 to go towards Capital expenditure that has been scaled up by more than 21%.
  
  

New and simplified personal income tax regime proposed:

Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.

• Remaining exemptions and deductions to be reviewed and rationalised in coming years.

 

• New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.

 

• Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.

 

• New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.

Corporate Tax:

• Tax rate of 15% extended to new electricity generation companies.
• Indian corporate tax rates now amongst the lowest in the world.

Dividend Distribution Tax (DDT):

• DDT removed making India a more attractive investment destination.

Start-ups:

• Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.

 

• Tax payment on ESOPs deferred.

MSMEs to boost less-cash economy:

• Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.

Cooperatives:

• Parity brought between cooperatives and corporate sector.

 

• Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.

 

• Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).

Tax concession for foreign investments:

• 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.

Affordable housing:

• Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.

 

• Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.

Tax Facilitation Measures

• Instant PAN to be allotted online through Aadhaar.
• ‘Vivad Se Vishwas' scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes:

• Waiver of interest and penalty - only disputed taxes to be paid for payments till 31st March, 2020.
• Additional amount to be paid if availed after 31st March, 2020.
• Benefits to taxpayers in whose cases appeals are pending at any level.

• Faceless appeals to be enabled by amending the Income Tax Act.
• For charity institutions:

• Pre-filling in return through information of donations furnished by the done.
• Process of registration to be made completely electronic.
• Unique registration number (URN) to be issued to all new and existing charity institutions.
• Provisional registration to be allowed for new charity institutions for three years.
• CBDT to adopt a Taxpayers' Charter.

Losses of merged banks:

• Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities.

Indirect Tax
GST:

• Cash reward system envisaged to incentivise customers to seek invoice.

Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run.

• Dynamic QR-code capturing GST parameters proposed for consumer invoices.
• Electronic invoice to capture critical information in a centralized system to be implemented in a phased manner.
• Aadhaar based verification of taxpayers being introduced to weed out dummy or non-existent units.
• GST rate structure being deliberated to address inverted duty structure.

Customs Duties:

• Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%.
• Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.
• Customs duty rates revised on electric vehicles and parts of mobiles.
• 5% health cess to be imposed on the imports of medical devices, except those exempt from BCD.
• Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics.
• Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically.

Trade Policy Measures

• Customs Act being amended to enable proper checks of imports under FTAs.
• Rules of Origin requirements to be reviewed for certain sensitive items.
• Provisions relating to safeguard duties to be strengthened to enable regulating such surge in imports in a systematic way.
• Provisions for checking dumping of goods and imports of subsidized goods being strengthened.
• Suggestions for reviews of exemptions from customs duty to be crowd-sourced.
• Excise duty proposed to be raised on Cigarettes and other tobacco products, no change made in the duty rates of bidis.
• Anti-dumping duty on PTA abolished to benefit the textile sector

Unprecedented Milestones and Achievements of Indian Economy

• India now the fifth largest economy of the world.
• 7.4% average growth clocked during 2014-19 with inflation averaging around 4.5%.
• 271 million people raised out of poverty during 2006-16.
• India's Foreign Direct Investment elevated to US$ 284 billion during 2014-19 from US$ 190 billion during 2009-14.
• Central Government debt reduced to 48.7% of GDP (March 2019) from 52.2% (March 2014).

Two cross-cutting developments:

• Proliferation of technologies (Analytics, Machine Learning, robotics, Bio-informatics and Artificial Intelligence).
• Highest ever number of people in the productive age group (15-65 years) in India.
  
  
  

16 Action points to Focus on Farmer's Income, Storage, Blue Economy and Animal Husbandry

Highlights

• PM-KUSUM to be expanded to 20 lakh Farmers
• Rs 15 Lakh Crore Agriculture Credit Target for Year 2020-21
• "KISAN RAIL" AND "KRISHI UDAAN" to be launched
• Warehouse Creation Through Viability Gap Funding on a PPP Mode at Block Level
• WOMEN and SHG'S role as "DHAANYA LAKSHMI" in Food Storage at Village Level to be Promoted
• 3477 Sagar Mitras to be set up to involve youth in Fisheries Sector

Doubling Farmers Income

• To expand PM-KUSUM to 20 lakh farmers for setting up stand alone solar pumps and help another 15 lakh farmers solarise their grid connected pump sets.
• To operationalize scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to grid.
• To encourage balanced use of all kinds of fertilizers and Zero Budget Natural Farming (ZBNF).
• Integration of negotiable warehousing receipts (e-NWR) and National Agricultural Market (e-NAM).
• Integrated farming systems for rainfed areas shall be expanded.
• Multi-tier cropping, bee keeping, solar pumps, solar energy production in non cropping season will be added.
• The portal on "Jaivik kheti" - online national organic products market will also be strengthened

Storage and Logistics

• Creation of warehouses through viability gap funding on a PPP mode at block level.
• Warehouse building by Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) on their land
• As a backward linkage,village storage scheme to be run by Self Help Groups (SHG). "Women, SHG's shall regain their position as Dhaanya Lakshmi"
• To build a seamless national cold supply chain for perishables, inclusive of milk, meat, Indian Railways will set up Kisan Rail-through PPP arrangements.
• There shall be refrigerated coaches in express and freight trains as well
• To help improve value realization especially in North-East and tribal districts Krishi Udaan will be launched by the Ministry of Civil Aviation
  

Animal Husbandry

• To eliminate Foot and Mouth disease, brucellosis in cattles and peste des petits ruminants (PPR) in sheep and goat by 2025 and to increase coverage of artificial insemination from 30 percent to 70 percent.
• Facilitate doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025.

Agriculture credit

• All eligible beneficiaries of Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) will be covered under the Kisan Credit Card (KCC) scheme.

Horticulture

• For better marketing and export, the budget propose supporting states which, adopting a cluster basis will focus on one product one district"

Blue Economy

• A framework for development, management and conservation of marine fishery resources and promotion of algae, sea weed and cage culture that will assist in raising fish production to 200 lakh tonnes by 2022-23.
• Government will involve youth in fishery extension through 3477 sagar mitras and 500 fish farmer producer organizations.
  
  

Union Budget 2020-21 allocates Rs.99,300 crore for Education, Rs. 3,000 crore for Skill Development

Highlights

• 150 Higher Educational Institutions to start apprenticeship embedded degree/diploma courses by March, 2021
• Degree level online education programmes for students of deprived sections of the society
• External Commercial Borrowings and FDI to be encouraged for financing education infrastructure
• Ind-SAT to be conducted in Asia and Africa under Study in India programme
• Special bridge courses for nurses, para medical staff and care givers to enhance their employability abroad
• National Police University and National Forensic Science University to be set up

Education and Skill (know! the detail)

• A total outlay of Rs.99,300 crore has been earmarked for the education sector in 2020-21 and Rs.3000 crore for Skill Development.
• By 2030, India is set to have the largest working age population in the world. Not only do they need literacy but they need both job and life skills
• About 150 Higher Educational Institutions will start apprenticeship embedded degree/diploma courses by March 2020-21.
• This will help to improve the employability of students in the general stream (vis-a-vis services or technology stream).
• The government will also start a program whereby urban local bodies across the country would provide internship opportunities to fresh engineers for a period of up to one year.
• National Skill Development Agency will give special thrust to infrastructure-focused skill development opportunities, the Minister explained.
• The New Education Policy will be announced soon.
• Steps will be taken to enable sourcing External Commercial Borrowings and FDI to ensure greater inflow of finance to attract talented teachers, innovate and build better labs.
• Degree level full-fledged online education programme will be started to provide quality education to students of deprived sections of the society as well as those who do not have access to higher education.
• These shall be offered only by institutions who are ranked within top 100 in the National Institutional Ranking Framework.
• India should be a preferred destination for higher education. Therefore, under its "Study in India" programme, an Ind-SAT is proposed to be held in Asian and African countries for benchmarking foreign candidates who receive scholarships for studying in Indian higher education centres.
• In order to meet the requirement of qualified medical doctors, it is proposed to attach a medical college to an existing district hospital in PPP mode.
• Viability gap funding will be made available to the States that fully allow the facilities of the hospital to the medical college and provide land at a concession.
• A huge demand exists for teachers/nurses/para medical staff and care givers abroad. Therefore special bridge courses may be designed jointly by the Ministries of Health and Skill Development along with professional bodies to match the employer's standards as well as meet the language requirements of various countries.
• A National Police University and a National Forensic Science University have also been proposed in the domain of policing science, forensic science, cyber-forensics etc. in the Budget.

Insurance cover for bank depositors raised from Rs 1 lakh to Rs 5 lakh

• Currently, in the (unlikely) event of a bank going bust in India, a depositor has claim to a maximum of Rs 1 lakh per account as insurance cover - even if the deposit in their account far exceeds Rs 1 lakh. Depositors holding more than Rs 1 lakh in their account have no legal remedy in case of the collapse of the bank.

Deposit Insurance and Credit Guarantee Corporation (DICGC )

• This amount is termed ‘deposit insurance'. The cover of Rs 1 lakh per depositor is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a fully owned subsidiary of the Reserve Bank of India.
• The Rs 1 lakh-cover is for deposits in commercial banks, regional rural banks (RRBs), local area banks (LABs), and cooperative banks.
• DICGC last revised the deposit insurance cover to Rs 1 lakh on May 1, 1993 - raising it from Rs 30,000, which had been the cover from 1980 onward.

Government To Sell Stake In Life Insurance Corporation Via IPO

• The government will sell a part of its holding in Life Insurance Corporation of India (LIC) through an initial public offering (IPO).
• The government owns 100 per cent of LIC.
• That LIC has been identified as a candidate for a potential public listing by the government,
• LIC is India's largest financial institution, and if LIC shares are listed on stock exchanges, it could easily emerge as the country's top listed company in terms of market valuation, overtaking current leaders Reliance Industries Ltd and Tata Consultancy Services.
• In the budget of July 2019, the government had announced a proposal to make minimum public holding of 35 per cent for listed companies.
• The government had listed the shares of General Insurance Corporation and New India Assurance through IPOs three years ago.
• Public listing of LIC will lead to more disclosures of investment and loan portfolios and better governance, with greater transparency and accountability.
• The government will have to amend the LIC Act first before taking the Corporation public.
• LIC is currently under the supervisory oversight of the Insurance Regulatory Development Authority of India (IRDAI), but it is governed by The LIC Act of 1956 which enables the state-owned insurer to obtain a special dispensation in several areas including higher stakes in companies beyond the limit set by the IRDAI.

The five ‘iconic' archaeological sites mentioned in the Budget

• The government proposes to set up an Indian Institute of Heritage and Conservation under the Ministry of Culture, and develop five archaeological sites as "iconic sites" with onsite museums in Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh), Sivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu).

Rakhigarhi

• Rakhigarhi in Haryana's Hissar district is one of the most prominent and largest sites of the Harappan civilisation.
• It is one among the five known townships of the Harappan civilisation in the Indian subcontinent.
• Between 2013 and 2016, excavations the skeletal remains of a couple were discovered. Interestingly, of the 62 graves discovered in Rakhigarhi, only this particular grave consisted of more than one skeletal remains and of individuals of the opposite sex together.

Hastinapur

• Hastinapur (in Meerut district of Uttar Pradesh) finds mention in the Mahabharata and the Puranas.
• One of the most significant discoveries made at this site was of the "new ceramic industry", which was named the Painted Grey Ware, which as per the report represented the relics of the early Indo-Aryans.

Sivasagar

• In Sivasagar, excavations at the Karenghar (Talatalghar) complex between 2000 and 2003 led to the discovery of buried structures in the north-western and north-eastern side of the complex.
• Among the structural remains found at the site were ceramic assemblages including vases, vessels, dishes, and bowls, etc

Dholavira

• Dholavira in Gujarat is located in the Khadir island of the Rann of Kutch, and like Rakhigarhi is one of the sites where the remains of the Harappan civilisation have been found.
• Dholavira is unique because remains of a complete water system have been found here.

Adichnallur

• Adichnallur lies in the Thoothukudi district of Tamil Nadu. The urn-burial site was first brought to light during a "haphazard excavation" by a German archaeologist in 1876.

What was the problem slowing down the economy?
There are four engines of GDP (gross domestic product) growth.

• Consumption of the private individuals ( C)
• Demand for goods from the government (G)
• investments from the businesses (I)
• net demand from exports and imports (NX).

GDP = C + G + I + NX

• Indian economy has been losing its engines.
• Corporate investments (I) engine has been slowing down since 2013(reasons -domestic bottlenecks and a sombre global demand)
• Net exports (NX) too were not improving.
• That left only C and G - that is private consumption and government expenditure.

Private consumption

• For the past two years, even private consumption started faltering and this has aggravated in the past one year, as witnessed in the slump in sales across the board (eg automobile sector)

Government expenditure

• Government demand carried the day for the longest time but with a sharp fall in revenues, there is no way the government can spend without gravely flouting the Fiscal Responsibility and Budget Management (FRBM) Act targets.

Government strategy

• Leaving people with more money will help boost their consumption levels, which are at present quite subdued, as witnessed in the slump in sales of goods and services across the board.
• Higher consumption will bring down the inventories in the economy and incentivise businesses to invest again.
• To make investments attractive for businesses the government has already cut the corporate tax rate last year.

NIRVIK scheme to provide high insurance cover for exporters

• Nirvik (Niryat Rin Vikas Yojana) scheme to provide enhanced insurance cover and reduce premium for small exporters.
• The scheme is being prepared by the commerce ministry.
• Under the scheme, also called the Export Credit Insurance Scheme (ECIS), the insurance guaranteed could cover up to 90 per cent of the principal and interest.
• The ministry has also proposed to subsidise the premium under the scheme that has to be paid by exporters of certain key sectors.
• The Export Credit Guarantee Corporation currently provides credit guarantee of up to 60 per cent loss.
• The country's exports contracted for a fifth month in a row by 1.8 per cent in December 2019 to USD 27.36 billion.
• During April-December 2019-20, exports slipped 1.96 per cent to USD 239.29 billion, imports declined 8.9 per cent to USD 357.39 billion, leaving a trade deficit of USD 118.10 billion.

Task force to be set up for recommending marriageable age for women

• A task force will be set up to recommend marriageable age for women.
• The government proposes to set up a tribal museum in Ranchi, Jharkhand, while five archaeological sites in Haryana, UP, Assam, Gujarat and Tamil Nadu will be developed with on-site museums.
• The government has allocated Rs 3,150 crore for Ministry of Culture, and Rs 2,500 crore for Ministry of Tourism.

100 more airports to be developed by 2025 to support UDAN scheme

• 100 more airports will be developed by 2025 to support the UDAN scheme.
• 1,150 trains will run under the public private partnership (PPP) mode, also four stations will be redeveloped with the help of the private sector.
• More Tejas type trains to connect tourist destinations.
• Proposal for setting up large solar power capacity alongside rail track is under consideration.

New scheme to boost domestic manufacturing of mobile phones, electronic equipment

• The government said it will introduce a new scheme to encourage domestic manufacturing of mobile phones, electronic equipment and semiconductor packaging in order to make India a part of the global manufacturing chain and boost employment opportunities.

Govt to bring new education policy

• Rs 99,300 crore has been allocated for the education sector and Rs 3,000 crore for skill development for the next fiscal.
• Steps will be taken to attract external commercial borrowing and FDI in the education sector
• To improve skills and provide employment government local bodies across the country will provide internships to fresh engineers up to one year
• Further, 115 higher education institutions will also start apprenticeship from March 2021.
• National Police University and National Forensic University are being proposed, while planning to allow degree level full-fledged online education programme by institutions ranked in top 100 to students who do not have access to higher education.
• The HRD's online teaching platform, SWAYAM has already announced to start providing full-fledged degrees along with the certificate programmes.
• An Indian Institute of Heritage and Conservation will also be set up.
• The government is working in collaboration with the education ministries across the world and the "New Education Policy (NEP) will be released soon" to improve the quality of higher education in India.
• The Ministry of skill development to create special bridge course to address the issue of the shortage of paramedical, caregivers, nurses, teachers and doctors.
• Attaching medical colleges with district hospitals on public-private partnership model (like in case of IIITs) to deal with the shortage of doctors.

Budget 2020 announces the largest ever science mission

• The government in its budget 2020 has announced a National Mission on Quantum Technologies & Applications (NM-QTA) with a total budget outlay of Rs 8000 Crore for a period of five years to be implemented by the Department of Science & Technology (DST).
• The new economy is based on innovations that disrupt established business models. Artificial intelligence, Internet-of-Things (IoT), 3D printing, drones, DNA data storage, quantum computing, etc., are re-writing the world economic order.
• Quantum technology is opening up new frontiers in computing, communications, cyber security with wide-spread applications.
• It is expected that lots of commercial applications would emerge from theoretical constructs which are developing in this area. It is proposed to provide an outlay of Rs. 8000 crore over a period five years for the National Mission on Quantum Technologies and Applications
• Their applications which will receive boost include those in aero-space engineering, numerical weather prediction, simulations, securing the communications & financial transactions, cyber security, advanced manufacturing, health, agriculture, education and other important sectors with focus on creation of high skilled jobs, human resources development, start-ups & entrepreneurship leading to technology lead economic growth.

What is quantum supremacy?

• It describes the point where quantum computers can do things that classical computers cannot.
• Our traditional computers work on the basis of the laws of classical physics, specifically by utilising the flow of electricity.
• A quantum computer, on the other hand, seeks to exploit the laws that govern the behaviour of atoms and subatomic particles. At that tiny scale, many laws of classical physics cease to apply, and the unique laws of quantum physics come into play.

Classical computer

• Bits of information are stored as either 0 or 1. Every string of such digits (bitstrings) represents a unique character or instruction; for example, 01100001 represents the lowercase "a".

Quantum computer

• In a quantum computer, information is stored in quantum bits, or qubits. And a qubit can be both 0 and 1 at the same time.
• Unlike classical physics, in which an object can exist in one place at one time, quantum physics looks at the probabilities of an object being at different points.
• Existence in multiple states is called superposition, and the relationships among these states is called entanglement.
• The higher the number of qubits, the higher the amount of information stored in them. Compared to the information stored in the same number of bits, the information in qubits rises exponentially.

National Logistics Policy will be Released Soon

• A National Logistics Policy will be released soon and it will clarify the roles of the Union Government, State Governments and key regulators
• The policy will create a single window e-logistics market and focus on generation of employment, skills and make MSMEs competitive.
• India's logistics sector is highly defragmented and the aim is to reduce the logistics cost from the present 14% of GDP to less than 10% by 2022.
• The National Logistics Policy formulated by the Commerce and Industry Ministry will improve India's trade competitiveness, create more jobs, improve India's performance in global rankings and pave the way for India to become a logistics hub.

The following announcements in Finance Minister's Budget Speech will make the National Logistics Policy more robust:

• Introduction of GST has brought in efficiency in logistics and transportation sector. It has reduced turnaround time of trucks by over 20%.
• Geo-tagging of all warehousing.
• Warehousing shall be promoted to comply with WDRA norms.
• VGF shall be provided for setting up of warehousing at the block / taluk levels on PPP mode. Food Corporation of India, Central Warehousing Corporation shall also offer their land for this purpose.
• Village Storage Scheme through Women Self-help groups shall provide backward linkages for seeds thereby reducing logistics costs. Financial assistance under MUDRA loans and NABARD shall be provided for this purpose.
• Cold chains for fish and perishables shall be promoted.
• Refrigerated vans shall be attached to passenger trains to promote movement of perishables quickly.
• Krishi trains shall also be run on PPP mode.
• Krishi Udan scheme shall be promoted / launched whereby horticulture and perishable commodities shall be transported through the air-route that will especially benefit the North-East region and tribal area. It will definitely help movement of perishables and foodstuff to produce-areas to consumption-areas.
• Cluster approach shall be adopted for promoting horticulture. One Product One District shall be encouraged.
• National Organic e-Market will be developed for organic products.
• Financing of negotiable warehousing receipts would be encouraged and also its integration with e-NAM.
• Rs.100 lakh crore National Infrastructure pipeline has been launched which includes over 6500 infrastructure projects. National infrastructure pipeline has projects worth Rs.19.6 lakh crore for roads, Rs.13.69 lakh crore for railways, Rs.1.43 lakh crore for airports and Rs.1.01 lakh crore for ports.
• Accelerated development of highways will be undertaken. 2500 kms. of access controlled highways, 9000 kms. of economic corridors, 2000 kms. of coastal and land-port roads and 2000 kms. of strategic highways.
• Delhi - Mumbai and Chennai - Bengaluru express highways to be made operational by 2023.
• 12 lots of highway building consisting of over 6000 kms. shall be offered for monetisation by 2024.
• Governance structure for corporatisation of one major port shall be introduced.
• Inland Waterways especially Jal Vikas Marg (NW1) will be made operational.
• Inland Waterways from Dhubri to Sadia in Assam shall be promoted by 2022.
• Inland Waterways shall be promoted under the Programme called Arth-Ganga i.e., promoting economic activities along with banks of the river.
• 100 more airports shall be established under the UDAN scheme.
• 1200 airplanes shall be added from the present 600.
• Rs.1.7 lakh crore have been allocated for the transportation sector in 2020-21.
  
  

KEEP Learning KEEP Evolving
TEAM CL IAS