📰 MEA rejects U.S. report on state of religious freedom in India
‘A foreign govt. has nolocus standito pronounce on the rights of our citizens’
•Foreign governments do not have the right to criticise India’s vibrant democracy and dedication to rule of law, said the Ministry of External Affairs (MEA) on Sunday, after the U.S. State Department’s annual report on religious freedom pointed out India’s failure to protect minority communities.
•“We see no locus standi for a foreign government to pronounce on the state of our citizens’ constitutionally protected rights,” said MEA Spokesperson Raveesh Kumar.
Pompeo visit
•The report sets the backdrop of the visit of Secretary of State Mike Pompeo that begins on June 25.
•The Hindu reported earlier that the report was released by Mr. Pompeo himself, and he referred to the issue of religious freedom as a “deeply personal” priority.
•The 2018 Report on International Religious Freedom referred to multiple instances of the government of Prime Minister Narendra Modi at the Centre and various State governments of the Bharatiya Janata Party having taken steps that hurt the Muslim community.
•The official spokesperson, however, maintained that India was proud of its “secular credentials”, saying, “it is widely acknowledged that India is a vibrant democracy where the Constitution provides protection of religious freedom, and where democratic governance and rule of law further promote and protect the fundamental rights.” Apart from the murders and lynching by cow vigilante groups, the report pointed out that there were several attempts to undermine minority institutions and change the names of cities that reminded one of the pluralistic nature of India. In this regard, the report highlighted the change of the name of Allahabad to Prayagraj.
•The MEA did not answer if the report and its observations about India’s failure to uphold and protect minority rights would feature in talks with Mr. Pompeo during his visits here between June 25 and 27.
📰 India rejects Pakistan’s charge of politicising FATF
‘Allegation meant to deflect attention’
•India on Sunday rejected Pakistan’s allegation that it had sought to “politicise” deliberations at the Financial Action Task Force (FATF), which concluded its plenary last week with more strictures against Pakistan.
•According to sources, the government has taken a strong view of Pakistan’s accusation that India had launched a “malicious campaign” to use the FATF’s process for its own “narrow, partisan objectives” against Pakistan. Pakistan’s Foreign Ministry was, in turn, responding to India’s statement that time was running out for Islamabad to show action “Against Money Laundering and Combating Financing of Terror (AML/CFT)” by groups that pose a transnational risk.
•Calling Pakistan’s statement on politicisation a “false ploy” meant to “deflect attention and evade scrutiny of [Pakistan’s] poor compliance of global standards on AML/CFT and hoodwink the global community”, the government sources pointed to Pakistan’s own attempts at trying to influence the outcome of the FATF process, which has placed the neighbour on a “greylist” of countries of concern. In June 2018, the FATF decided unanimously to put Pakistan on the greylist, and hand it a 27-point action plan meant to be implemented within 18 months (by September 2019). If it fails to fulfil its FATF commitments, it could face the “next steps” or being moved to the “blacklist”, the FATF has warned.
•The sources say that instead of moving seriously on the checklist, including shutting down support for groups such as the Lashkar-e-Taiba and Jaish-e-Mohammad, Pakistan’s leadership has been trying to influence FATF member countries for support. At the most recent FATF plenary, where proceedings are meant to be secret and taken by consensus, Pakistan is believed to have received the backing of China, Turkey and Malaysia to avert being put on the blacklist immediately.
•In particular, the sources pointed to Pakistan Foreign Minister Shah Mehmood Qureshi’s visits to various capitals, and telephone calls to other FATF member governments asking for help in staving off pressure at the global watchdog body’s plenary session.
•At the Orlando plenary, apart from China, Turkey and Malaysia, three countries Prime Minister Imran Khan has visited in the past few months, countries such as Indonesia, Saudi Arabia and the Gulf Cooperation Council members pitched for more time for Pakistan to comply with the action plan. However, the U.S., Japan and Israel joined India in ensuring a firm line was taken in the final outcome document.
•Another potential worry for India is that China’s appointee Xiamen Liu has taken over the presidency of the FATF from the U.S. from this month. While the President essentially has an administrative position, he or she decides on the focus of the agenda. The outgoing president, Marshall Billingslea, for example, steered the body towards more strictures or “counter-measures” against Iran over the past year.
•The rapid cross-fire of statements between Islamabad and New Delhi over the FATF’s latest strictures indicate that the next three months, ahead of the next plenary session when the task force will conduct a full review of Pakistan’s actions, will see more such heated exchanges. India has been publicly pushing for Pakistan to be placed on the “blacklist”, alongside Iran and North Korea for its failure to show “credible, verifiable, irreversible and sustainable measures” against terror groups operating within its territory.
•Pakistan has often cried foul over India’s statements, and even wrote to the FATF earlier this year asking for India to be taken off the committee overseeing the review after former Finance Minister Arun Jaitley said Pakistan should be downgraded by the FATF.
•A blacklist entry for Pakistan will mean it could lose potential loans and foreign investment, be shunned by the IMF, the World Bank, the ADB and the EU and also suffer a downgrade by credit rating agencies such as Moody’s, S&P and Fitch.
📰 Saudi launches residency scheme to boost revenue
The scheme will allow expats to do business without a Saudi sponsor, buy property and sponsor visas for relatives.
•Saudi Arabia on Sunday launched a new special residency scheme aimed at luring wealthy expats as the petro-state seeks to boost non-oil revenue.
•The scheme offers a permanent residency for 800,000 riyals ($213,000) and a one-year renewable residency costing 100,000 riyals ($27,000), according to the online portal for registrations.
•The scheme will allow expats to do business without a Saudi sponsor, buy property and sponsor visas for relatives, the website said.
•Analysts say the programme will largely benefit wealthy Arabs who have lived in Saudi Arabia for years without permanent residency or MNCs seeking to do long-term business .
•The move appears to be aimed at boosting non-oil revenue as the kingdom seeks to diversify its economy.
•Though it was approved by the Saudi Cabinet last month, the portal began accepting applications on Sunday.
•Saudi Arabia is currently home to some 10 million overseas workers.
📰 Reimagining the NITI Aayog
The institution can play an important role in refreshing India’s fiscal federalism
•India’s Constitution-makers thought of India as a union of States with a centripetal bias, done, advisedly, to preserve the unity and integrity of a newly fledged nation. Since then, the Indian economy, polity, demography and society have undergone many changes. The new aspirational India is now firmly on a growth turnpike. It is in this context that we revisit India’s fiscal federalism and propose redesigning it around its four pillars.
•Typically, federations (including the Indian one) face vertical and horizontal imbalances. A vertical imbalance arises because the tax systems are designed in a manner that yields much greater tax revenues to the Central government when compared to the State or provincial governments; the Constitution mandates relatively greater responsibilities to the State governments. For example, in India, post the advent of Goods and Services Tax (GST), the share of States in the public expenditure is 60% while it is 40% for the Centre to perform their constitutionally mandated duties.
•The horizontal imbalances arise because of differing levels of attainment by the States due to differential growth rates and their developmental status in terms of the state of social or infrastructure capital. Traditionally, Finance Commissions have dealt with these imbalances in a stellar manner, and they should continue to be the first pillar of the new fiscal federal structure of India.
Understanding the imbalance
•However, in India, the phenomenon of horizontal imbalance needs to be understood in a more nuanced fashion. It involves two types of imbalances. Type I is to do with the adequate provision of basic public goods and services, while the second, Type II, is due to growth accelerating infrastructure or the transformational capital deficits. The latter are known to be historically conditioned or path dependent. Removing these two imbalances clearly comprises two distinct policy goals and calls for following the Tinbergen assignment principle, which are two different policy instruments. It is here that we believe that NITI Aayog 2.0 must create a niche, assume the role of another policy instrument and become the second pillar of the new fiscal federal structure.
•In the past, the Planning Commission used to give grants to the States as conditional transfers using the Gadgil-Mukherjee formula. Now with the Planning Commission disbanded, there is a vacuum especially as the NITI Aayog is primarily a think tank with no resources to dispense, which renders it toothless to undertake a “transformational” intervention. On the other hand, it is too much to expect the Union Finance Commission to do the dual job. In other words, there is an urgent need for an optimal arrangement. It is best that the Union Finance Commission be confined to focussing on the removal of the horizontal imbalance across States of the Type I: i.e. the basic public goods imbalance. We need another institution to tackle the horizontal imbalance of the Type II; for this the NITI Aayog is the most appropriate institution. It can be argued that the Finance Ministry is the other alternative to deliver the goods in this regard but it is ill-suited to do this; its primary duty is to concern itself with the country’s macro-economic stability and the proper functioning of the financial system rather than be an instrument of growth at the sub-national level.
•Towards this task of cooperative federalism, NITI Aayog 2.0 should receive significant resources (say 1% to 2% of the GDP) to promote accelerated growth in States that are lagging, and overcome their historically conditioned infrastructure deficit, thus reducing the developmental imbalance. In short, the NITI Aayog should be engaged with the allocation of “transformational” capital in a formulaic manner, complete with incentive-compatible conditionalities. The variables or parameters used in this formulaic transfer will be very different from those traditionally used by the Finance Commission.
•NITI Aayog 2.0 should also be mandated to create an independent evaluation office which will monitor and evaluate the efficacy of the utilisation of such grants. In doing so, it should not commit the mistake of micro-management or conflicts with line departments. It must be also accorded a place at the high table of decision-making as it will need to objectively buy-in the cooperation of the richer States as their resources are transferred to the poorer ones.
Ushering in decentralisation
•The same perspective will have to be translated below the States to the third tier of government. This is crucial because intra-State regional imbalances are likely to be of even greater import than inter-State ones. Decentralisation, in letter and spirit, has to be the third pillar of the new fiscal federal architecture. De jure and de facto seriousness has to be accorded to the 73rd and 74th constitutional amendments. For this, the missing local public finance must be birthed. One of the ways for this is through the creation of an urban local body/panchayati raj institutions consolidated fund. This would mean that Articles 266/268/243H/243X of our Constitution will need to be amended to ensure that relevant monies directly flow into this consolidated fund of the third tier.
•Through such constitutional amendments, the Centre and States should contribute an equal proportion of their Central GST (CGST) and State GST (SGST) collections and send the money to the consolidated fund of the third tier. For instance, one-sixth sharing of the CGST and SGST with the third tier can generate more than 1% of the GDP every year for the financing of public goods by urban-level bodies. Such an arrangement will be the third pillar of fiscal federalism. Further, the State Finance Commissions should be accorded the same status as the Finance Commission and the 3Fs of democratic decentralisation (funds, functions and functionaries) vigorously implemented. This will strengthen and deepen our foundational democratic framework.
Fine-tuning the GST
•The fourth pillar — and in a sense what is central and binding — is the “flawless” or model GST. It is to the credit of our democratic maturity that the GST Bill was passed unanimously by Parliament; but in its present form, it is far from flawless. It needs further simplification and extended coverage. We need to quickly achieve the goal of a single rate GST with suitable surcharges on “sin goods,” zero rating of exports and reforming the Integrated Goods and Services Tax (IGST) and the e-way bill. The GST Council should adopt transparency in its working, and create its own secretariat with independent experts also as its staff. This will enable it to undertake further reforms in an informed and transparent manner. Thus, India will be able to truly actualise the “grand bargain” and see the GST as an enduring glue holding the four pillars together by creating the new fiscal federal architecture and strengthening India’s unique cooperative federalism.
📰 Walking a diplomatic tightrope
For India and the U.S., managing bilateral ties is linked to balancing nationalist, cultural and economic agendas
•Is the die already cast for U.S. Secretary of State Mike Pompeo’s forthcoming visit to India? Mr. Pompeo, and his Indian counterpart, External Affairs Minister S. Jaishankar, are the trusted lieutenants of their leaders, U.S. President Donald Trump and Prime Minister Narendra Modi, respectively, and largely aligned with their politics. But Mr. Pompeo and Mr. Jaishankar are also the links between the disruptive politics of their chief executives and the conventional strategic approach of professionals who work under them, and the legacy ecosystems in their respective countries. They have the tough task of managing a bilateral relationship that they both know is critical, without appearing to be undermining the nationalist, cultural and economic agendas of their leaders, which mirror each other, and hence create a situation of likes repelling each other.
•A general presumption informing scholarship on international relations is that there is a non-negotiable and unchanging precept of national interest that determines the conduct of nations. Mr. Modi and Mr. Trump are two leaders who are rewriting the notion of national interest itself — for instance, secularism was considered to be India’s national interest until recently; immigration and trade were considered to be in America’s national interest.
•Mr. Trump and Mr. Modi are guided by nationalisms that have cultural and economic components. In both, their views converge in some aspects and conflict in some others. For instance, on the cultural front, they could cooperate on global Islamism. But the growing presence of Indians in America is a source of conflict — Mr. Modi’s politics involves boosting the global Hindu; but Indian Americans are cultural aliens to Mr. Trump’s supporters, besides being seen to be their economic adversaries. The sustained squeeze on Indian guest workers entering the U.S., particularly through the H-1B visa programme, is a case in point.
Country-specific perspectives
•What does Mr. Modi want for India from abroad? He wants investment, technology, arms, but does not want finished products (other than arms) or foreign ideas — Christianity, an open global market, the right to self-determination, human rights, Western strands of democracy coming through missionaries, international bodies and non-governmental organisations (NGOs). This has been expressed through higher tariffs on imports and restrictions on global NGOs. This list does not entirely correspond to what Mr. Trump wants to sell — he wants to sell only finished products at lower tariffs, and keep technology and capital within the borders of America protected.
•From an Indian perspective, Mr. Trump has upended American strategy in two fundamental aspects. His approach to international ties gives precedence for commerce over the strategic, and workers over corporations. Professional strategists conventionally understood the U.S.’s international ties from the perspective of its multinational corporations. These corporations wanted cheap manufacturing in China and Southeast Asia and U.S. policy enabled that pursuit. Corporations wanted cheap labour from India by outsourcing work and importing workers into the U.S. But Mr. Trump does not want American work coming to India, or Indian workers going to America; Mr. Modi wants both. Mr. Trump’s disinterest in strategic matters and obsession with selling meet Mr. Modi’s desire for arms acquisition, however. Given a choice, Mr. Trump would be willing to sell arms to India without regard for issues such as regional stability that preoccupy professionals in the State Department.
•India’s trade surplus is tiny relative to the size of the American economy and its trade volumes. Presidents before Mr. Trump always privileged the strategic components of America’s global ties over trade and commercial issues. India benefitted from that approach. When commerce becomes the only lens that the U.S. sees the world through, India and China look similar — trying to extract benefits from it. Mr. Trump thinks — he has said it several times — that India and China took his predecessors for a ride. Mr. Modi thinks his predecessors were weak leaders who were taken advantage of by the world, and he also wants to show how strong he is.
•When Mr. Trump sees India and China as two similar countries that are taking advantage of America with protectionism, weak intellectual property protection, and higher emissions under the climate treaty, the strategic reason for India-U.S. alignment, which is the menacing rise of China, gets weakened. In fact, the Wuhan summit, that marked a new thaw between India and China, had as its backdrop Mr. Trump’s tirade against both countries on these issues.
The terror fight
•One war that Mr. Trump wants to end (in Afghanistan) and another war that he appears to be itching to begin (with Iran) have major implications for India and its ties with the U.S. India wants America’s continued engagement in Afghanistan and peace with Iran. Just as the U.S. was campaigning hard to have Masood Azhar designated as a global terrorist, it was also seeking Pakistan’s help to persuade the Taliban for a deal in Afghanistan. The point being that India-U.S. cooperation on terrorism has several components to be factored in and the Indian euphoria surrounding Mr. Trump’s relentless bluster against Pakistan needs to tempered with some realism.
•The Hindutva nationalists in India have a deep suspicion of China and its intention and they consider the U.S. as an ally and a partner, but the tactical nature of that approach is not hidden or unstated. The cultural suspicion of the U.S. itself is an additional factor.
•A speech by Rashtriya Swayamsevak Sangh chief Mohan Bhagwat to a gathering of the organisation on June 16 in Nagpur is instructive: “We are progressing and we will continue to progress. When India advances, when our Hindu society advances... the implication of that is that the selfishness that dominates the world is bound to come to an end… Countries that dominate the world using their money power and military power with the facade of grandiloquence. Therefore, there are many out there who do not want India’s progress. I don’t take names, but you understand. Many countries in the world are forced to support us because we have now become stronger. That is for advancing their interests. If we let them take advantage of our internal differences, our new beginning after 70 years will be eclipsed before it fully blossoms and bears fruit.”
📰 Southwest monsoon’s current rainfall deficit is 38%, says IMD
Only half of usual summer foodgrain crop area sown so far
•With the Southwest monsoon running late, the country faces a 38% current rainfall deficit, according to the India Meteorological Department (IMD).
•The IMD said the country as a whole received 70.9 mm rainfall so far this monsoon season, whereas the long period average is 114.2 mm. This leaves a shortfall of 38%.
•The rain deficit has depleted reservoirs, besides delaying sowing of summer foodgrain crops. Parts of central and peninsular India are staring at a drought for the second successive year.
Farmers’ plea
•Farmers’ groups are demanding that the government declare drought in affected areas without waiting till the end of the monsoon, so that relief measures can begin this month. “There must not be any delay in the declaration of drought. Instead of waiting for the end of the monsoon, drought must be declared in all those districts where sowing has been severely affected owing to 50% or greater deficit in June,” said the All India Kisan Sangharsh Coordination Committee, a platform of over 200 farmer groups.
•According to the latest report from the India Meteorological Department (IMD), the country has only received 43% of the normal monsoon rainfall so far.
Vidarbha worst hit
•Out of 36 meteorological divisions, only six divisions have received normal rainfall or more. In terms of districts; 47% face large deficiencies (at least 60% below normal) or no rainfall at all. In total, almost 80% of districts face a rainfall deficit of at least 20% below normal. The Vidarbha region, with an 89% monsoon deficit, is worst affected. Regions like Marathwada and Madhya Maharashtra are also facing drought-like situations, especially as they faced deficits in pre-monsoon rainfall as well.
•According to the Central Water Commission (CWC), 80% of the country’s 91 major reservoirs have below-normal storage. In fact, 11 reservoirs have no water at all.
•Summer or kharif sowing is lagging behind as a result of the tardy monsoon, with just over half of the area usually sown with foodgrain crops covered so far. Out of almost 32 lakh hectares that have usually been sown by foodgrains by this time, farmers have only planted 17 lakh hectares so far. Since this is early in the season, the gap is expected to close if the monsoon picks up steam.
Biggest delays
•The biggest delays are in pulses and oilseeds, which are dryland crops completely dependent on monsoon rains. Rice, which is usually sown in irrigated land, is only slightly slower than usual. Sugarcane, a water-guzzling cash crop, has actually been sown on a larger amount of land than usual.
•The AIKSCC has also demanded that the Central norms for crop loss compensation (input subsidy) must be revised to at least Rs. 10,000 per acre for un-irrigated land and proportionately higher amounts for irrigated land and horticultural crops. Crop insurance must be paid in full and in a timely manner, while the Reserve Bank of India (RBI) must ensure that farmers are not denied credit due to impending drought, it said.
‘Guarantee work’
•The farmers’ groups called on the government to extend the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) from 100 to 150 days of work in drought-affected areas, and offer the job guarantee to every adult, not every household.
📰 Vulnerable Ranganathittu bird sanctuary to get a solid makeover
Turbulence in the Cauvery and submergence of islands had disturbed the avians in 2018
•The revamping and strengthening work at Ranganathittu bird sanctuary is expected to commence shortly, with the Forest Department — the custodian of the sanctuary — finalising plans for it.
•The bird sanctuary on the banks of the Cauvery, near Srirangapatna, comprises a group of islands and is spread over an area of around 40 acres. It was formed when Kanteerava Narasimharaja Wadiyar of the then Mysuru royal family constructed an embankment across the Cauvery in 1648. Ranganathittu became a “bird sanctuary” in 1940 owing to the initiatives/interest of noted ornithologist Salim Ali.
•Over 200 species of migratory and Indian birds, at least 60,000 in number, arrive here every year for nesting and breeding.
•The turbulence in the river and subsequent submergence of islands had severely disturbed the avians in 2018 during rainy season.
•Incessant turbulence in the Cauvery for nearly two weeks in July last, owing to heavy water release from the upstream Krishnaraja Sagar, had caused massive damage. Many trees were uprooted and nests were washed away, forest officials said.
•An island-to-island inspection was conducted in August last year to assess the damage inflicted by the deluge. Later, it was decided to initiate measures to strengthen the islands, they added.
•The soil stabilisation [strengthening the island] measures have already been conducted at seven islands. Similar works would be initiated at eight more major islands, a senior forest officer told The Hindu.
•The department has named each island after the bird variety and tree species for easy identification.
•To prevent soil erosion during increased flow in the Cauvery, the department will widen the islands and strengthen the boundaries with boulders. It will also keep mud bags as they act as a protective layer, besides improving the thickness of the islands by dumping mud.
•After taking these preventive steps, plants of different species will be planted to increase the tree count. The protective layer will stop the soil from eroding and will lead to the growth of necessary shrubs in every island so that sufficient vegetation is available for birds for nesting, according to the officer.
📰 Scientists decode genome of ‘miracle plant’
Known for its many medicinal properties
•Scientists from the University of Kerala have decoded the genetic make-up of Arogyapacha (Trichopus zeylanicus), a highly potent medicinal plant endemic to the Agasthya hills.
•This ‘miracle plant’ is known for its traditional use by the Kani tribal community to combat fatigue. Studies have also proved its varied spectrum of pharmacological properties such as anti-oxidant, aphrodisiac, anti-microbial, anti-inflammatory, immunomodulatory, anti-tumour, anti-ulcer, anti-hyperlipidemic, hepatoprotective and anti-diabetic.
•The project was undertaken in the State Inter University Centre of Excellence in Bioinformatics at the Department of Computational Biology and Bioinformatics, University of Kerala.
Lack of reference
•The lack of a reference genome that hindered extensive research on Arogyapacha prompted the researchers to sequence the whole genome.
•“The project is bound to open up a new window to the plant’s molecular secrets,” says Achuthsankar S. Nair, head of the department.
•Led by post-doctoral fellow Biju V.C., the team included Anu Sasi, Veena S. Rajan, Sheethal Vijayan, and Shidhi in the analysis and annotation of the genome. Another researcher from the department, Anoop P.K., a member of the Kani tribe, was also associated with it.
•According to Dr. Biju, the genome and annotation data will be a valuable resource to expedite research on Arogyapacha, particularly its secondary metabolism, genetic breeding, and comparative studies.
•While this is the first report of draft genome sequencing of a plant species to be brought out by the University of Kerala, two more species are currently being sequenced.
•The manuscript has been accepted for publication in G3: Genes, Genomes and Genetics, published by the Genetics Society of America.
Datasets in portal
•Besides, the raw sequence data and genome assembly have been deposited in the US-based public database maintained by the National Centre for Biotechnology Information (NCBI). The functional annotation datasets can be downloaded from keralauniversity.ac.in/trichopus-zeylanicus.
📰 Plants may be spreading superbugs to humans
Spell threat to global public health
•Plant-based foods can transmit antibiotic resistance to the microbes living in our gut, a study has found.
•Antibiotic-resistant infections are a threat to global public health, food safety and an economic burden.
•To prevent these infections, it is critical to understand how these bacteria are transmitted.
•“Our findings highlight the importance of tackling food-borne antibiotic-resistance from a food chain perspective, including plant-foods and meat,” said Marlene Maeusli, a PhD candidate at the University of Southern California.
•Spread of antibiotic-resistant superbugs from plants to humans is different from outbreaks of diarrheal illnesses caused immediately after eating contaminated vegetables. Superbugs can asymptomatically hide in (colonise) the intestines for months or even years, and while escaping, cause an infection.
•The researchers developed a novel, lettuce-mouse model system that does not cause immediate illness to mimic consumption of superbugs with plant-foods.
•They grew lettuce, exposed it to antibiotic-resistant E. coli, and fed it to mice. Later, they analysed their faecal samples over a period of time.
•“We found differences in the ability of bacteria to silently colonise the gut after ingestion, depending on a variety of host and bacterial factors,” said Mr. Maeusli.
📰 Device to trap ocean plastic relaunches
•A floating device designed to catch plastic waste has been redeployed in a second attempt to clean up an island of trash swirling in the Pacific Ocean between California and Hawaii.
•Boyan Slat, creator of The Ocean Cleanup project, said on Twitter that the 2,000-foot long floating boom that broke apart late last year was sent back to the Great Pacific Garbage Patch this week after four months of repair.
•A ship towed the barrier from San Francisco to the patch in September to trap the plastic but it broke apart under constant waves and wind.
📰 Lacklustre meet
GST Council has missed the chance to send positive signals to boost consumer demand
•The Goods and Services Tax Council’s first meeting under the new government did not deliver any big surprises. Apart from some minor changes to the existing structure and procedures under the GST, the council’s meeting on Friday, under Finance Minister Nirmala Sitharaman, was largely a lacklustre event. There was some expectation that the council would consider a significant cut in tax rates across the board in order to help spur consumer demand that has been sagging in recent quarters. But none of that happened. The meeting ended with some changes in procedure that are expected to tackle tax evasion and make GST filing easier. In particular, Aadhaar has been approved as sufficient proof to obtain GST registration. Even the expectation that there would be a cut in the tax imposed on electric vehicles, from 12% to 5%, was not met. The government may be worried about the revenue implications of any significant across-the-board tax cut. Although GST collections have been encouraging in the past couple of months, monthly tax collections have largely been modest since the introduction of the tax regime in mid-2017, failing to meet the government’s own targets most of the time. But such caution may not help the larger cause of the economy, which urgently needs a boost in some form. A significant cut in rates could have sent out the strong signal that the NDA government is serious about pushing through serious pro-growth reforms during its second term in office.
•Another notable decision taken by the council was the one to extend the tenure of the National Anti-Profiteering Authority by two years, till November 2021. Further, the council increased the quantum of penalty that could be imposed by the authority on profiteering companies, from the current maximum of Rs. 25,000 to an additional 10% of the profiteered amount. Given that the government has increased the powers of the anti-profiteering body, it would not be surprising if the body becomes a permanent feature under GST. This does not send a promising message to the business community ahead of the Union Budget, scheduled to be presented in Parliament on July 5. The anti-profiteering clause assumes that government action is absolutely necessary in order to pass on the benefit of tax cuts to consumers, or else tax cuts may simply end up adding to the profits of businesses. This is wrong. While businesses naturally try to profit from lower taxes, the forces of competition make sure their profit margins are driven back down to normal. The alternative of having a bureaucracy to deal with the issue makes profit look like a bad word, and encourages rent-seeking by corrupt authorities.
