review the Fiscal Responsibility and Budget Management (FRBM) Act?

What could be the options before the five-member committee that has been set up to review the Fiscal Responsibility and Budget Management (FRBM) Act?

The committee, headed by former revenue secretary N K Singh, held its first meeting last Saturday and is expected to propose an alternative fiscal framework as suggested by Finance Minister Arun Jaitley in his last Budget.

Why a review?

From the fiscal perspective, the arguments in favour of transitioning to a new, rule-based, fiscal framework can be made at many levels.

First, the governments of all hues would prefer to pivot away from the fiscal conservatism towards profligacy as it pays rich dividends politically. But, such policy leads to wasteful expenditure at both at the central as well as state level.

Second, higher fiscal deficits tend to crowd out the private sector. For instance, in the current macroeconomic situation, the combined fiscal deficit of the Centre and states is pegged at six per cent of gross domestic product or GDP (for Centre, fiscal deficit is budgeted at 3.5 per cent of GDP while for a state it is projected at around three per cent). Add to this, borrowing of the public sector enterprises and bodies like the National Highways Authority of India (NHAI) and with the household sector's financial savings dipping down to around 7.5 per cent of GDP, the space for private sector borrowing is severely constrained.

Third, higher fiscal deficits also tend to be inflationary.

Alternative frameworks

It was in the backdrop of this context the finance minister took the decision to review the FRBM Act. And though the committee has just begun to deliberate, it has time till the end of October to put forth a road map. Analysts have proposed various alternative frameworks.

One such proposal is to transition to a cyclically adjusted fiscal deficit framework. Under this arrangement, government spending would increase during economic downturns to shore up aggregate demand, only to recede when private spending strengths. The policy stance would thus be counter cyclical- increase government spending during times of distress as opposed to a pro-cyclical policy and increase government spending when the going is good.

There is some merit in this argument. While theoretically moving to such a framework makes sense, in practice it's difficult to implement. Part of the problem is that of measurement. This framework relies on measuring the economy's potential GDP and also requires clarity about the nature of business cycles. But, here lies the problem. There does not exist any reliable estimate of India's potential GDP.

The most recent study that estimates potential GDP was carried out by Barendra Kumar Bhoi and Harendra Kumar Behera, who work at the Monetary Policy Department of RBI. They have estimated India's potential GDP to be close to seven per cent (6.8 per cent to be precise) during 2009-15.

But the problem with this estimate, as the authors themselves acknowledge, is that "considerable uncertainty attached to these estimates, mainly related to the methodology, underlying data and judgments about different parameters." Thus the authors provide an indicative range of 6.3- 7.3 per cent. Such a big range is unlikely to inspire confidence, especially when doubts over the new GDP series continue to linger.

Echoing these concerns, Rathin Roy, director, the National Institute of Public Finance and Policy (NIPFP), says, "We simply do not have robust modelling of either the Indian business cycle or the output gap on which any credible policy analytics can be based." Roy is a member of the committee which has been tasked with the review of the FRBM act.

Some have also floated the idea that rather than a fixed fiscal deficit target, a range or a band is more preferable. The governments are likely to prefer a higher fiscal deficit.

Simply ascribing a range may not work as the government of the day may choose the higher end of the range. This would undercut the governments efforts to rein in wasteful expenditure.

Economists like Pinaki Chakraborty, Professor at NIPFP, therefore, propose to "link the range for fiscal deficit to a number of indicators such as the governments debt level, its interest service obligations and its revenue deficit which gauge the fiscal health of the government."

"If the governments are able to reduce or eliminate their revenue deficit then they should get the flexibility for a higher fiscal deficit," he says.

One possible alternative is to link government spending to bank credit, data on which is both reliable and available timely. The logic for choosing this indicator is pretty straightforward. Sluggish bank credit signals low private sector demand and could be construed as a sign that greater government spending is needed to boost aggregate demand.

But the problem with this framework is "it ignores supply side issues" says M Govinda Rao, member of the 14th Finance Commission and former director of NIPFP. Bank credit could be sluggish due to a variety of reasons. "It depends on many other factors too like global economic environment, the governments borrowings, among others" says Chakraborty.

Another indicator that could be used is electricity consumption by the manufacturing sector. But in the absence of reliable data, this option is also off the table.

While the committee will grapple with these issues in the coming months, what indicators are finally used is a matter of inclination. "At the end of the day it's a question of judgment. A thumb rule have to be applied," says Rao.

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THE PANEL

• Panel to review the fiscal framework is headed by former secretary N K Singh
   
• Its members are former finance secretary Sumit Bose, Chief Economic Advisor Arvind Subramanian, RBI Deputy Governor Urjit Patel and NIPFP Director Rathin Roy
   
• The existing FRBM Act prescribes a target fiscal deficit of 3% of GDP
   
• The Fourteenth Finance Commission (chaired by Y V Reddy) recommended a 3% fiscal deficit for the centre and another 3% for the states

GST’s Rajya Sabha impasse

Italy is Europe’s fourth most populous country, and in terms of gross domestic product (GDP), the eighth largest in the world, only slightly behind India. It has been a parliamentary democracy since World War II. But not even once did it elect a government that could last a full term of five years. It has had 63 different governments so far. One source of this instability is the nature of its bicameral legislature. The upper and lower Houses have 315 and 630 members, respectively, elected by proportional voting. Hence, smaller parties (with more than a threshold of 3% of the vote) can hold great sway. A party with less than 10% of seats can even form the government, typically with a coalition. Passing legislation requires it to pass the simple majority test in both Houses. On many occasions, legislation has stumbled because it was blocked by the upper House. In that sense, the upper House has equal power and a very unusual veto. This dysfunctional feature has led to instability, revolving-door governments and frequent charges of horse-trading. To change this, Italy needs to reform its constitution, and curtail the power of its upper House. Indeed, this reform has been the top priority of Matteo Renzi, who at age 39 became Italy’s youngest prime minister two years ago. After a lot of jockeying, this reform bill was finally passed in Parliament in April, despite huge opposition. One opposition party tried desperately to derail the passage, by proposing 82 million amendments to the draft bill! These were computer generated multiple versions by changing small stuff like a comma or full stop. The rules required that each version had to be printed and put on record. Obviously, some people can go to ridiculous lengths to stop reform. Luckily for Italy, this reform has passed at long last, and a referendum in October will lead to the constitutional overhaul. This portends more stable governments in the future.

The problem of the upper House of bicameral legislatures holding up crucial reform is also being experienced in Canada and Australia, albeit less severely than Italy. The origin of this problem can be traced to a mini-crisis in 1911 in UK Parliament, when the budget passed by the House of Commons was rejected by the House of Lords. It led subsequently to the Parliament Act of 1911 and 1949, establishing the formal dominance of the lower House, and also the Salisbury Doctrine, that the upper House would not by convention, oppose bills on second or third reading, having once passed by the lower House. One consequence of this is that ‘money bills’ are required to be passed only in the lower House, a feature codified in India’s Constitution.

India’s upper House is council of states whose members are elected indirectly by state legislatures. (By contrast in the US, the upper House, i.e. the Senate members, are directly elected). The Rajya Sabha represents the states. Its role is also that of providing checks and balances in lawmaking, to provide reason and deliberation, and to function beyond considerations of party politics. If a legislation that originates from the Lok Sabha is driven by popular will and brute majority, then Rajya Sabha can subject it to the broader test of rationality, practicality, relevance and reasonableness. That’s because the Rajya Sabha is more immune to electoral interests. But sometimes its deliberations can also slow down legislation or eventually kill it (see for instance, The Deliberative Indian ). In rare instances, the Rajya Sabha’s delay and intransigence can become counter-productive.

One such rare instance may be the present case of the goods and services tax (GST) bill. The GST journey is already 16 years old. This span covers two stints each of both Congress and Bharatiya Janata Party-led governments, with each having promised to roll it out during their respective terms. One can safely assume that there is strong bipartisan support. It will be the most important indirect tax reform since independence. It is a huge deal, because it entails all 29 states and seven Union territories voluntarily giving up their constitutional right to impose sales tax (and sundry other taxes) in exchange for a uniform countrywide system. It’s a grand bargain. It will create a borderless common and integrated economic market within India, and is expected to permanently add to GDP growth significantly. The roll-out of GST requires a constitutional amendment, and hence passage in both Houses. It has cleared the lower House. But now, it is stuck in the Rajya Sabha where it needs 164 votes. The GST is not a ‘money bill’, hence needs assent of both Houses. Passing the GST bill is also fulfilment of a promise made in the manifestos of both the national parties. Of the three technical objections raised in the Rajya Sabha, two have been sorted out. These relate to eliminating the 1% additional tax, and evolving an autonomous dispute resolution scheme. The only sticking point is whether to put an upper numerical limit in the law on the applicable tax rate. This can surely be incorporated in the rules that will be framed or in some appropriate manner. The Rajya Sabha should now develop an informal convention (a laSalisbury) that a policy which has been thoroughly discussed, has broad and bipartisan support, and has passed with a majority in the lower House, should not be held up. As far as the GST bill is concerned, members of the Rajya Sabha should not be constrained by their party whip. While we don’t quite need an Italian surgery, we can surely avoid an unnecessary impasse.

uppcs exam 2016 updates

uppcs exam 2016 updates

mains exam :expected in september (3rd week) ,2016 (earlier it was scheduled on 24th june.

cutoff for general :141 marks (106 questions)

RO/ARO -2016 will be held in 2016 itself.

‪#‎uppcs‬ ‪#‎uppsc‬ ‪#‎uppcs2016mains‬

Shri Bhim Sain Bassi takes over as Member UPSC

Shri Bhim Sain Bassi takes over as Member UPSC

Shri Bhim Sain Bassi took the Oath of Office and Secrecy as Member, Union Public Service Commission today. The Oath was administered by Shri Deepak Gupta, Chairman, UPSC.

An Officer of Indian Police Service of AGMU cadre of 1977 batch, Shri Bhim Sain Bassi during his career spanning over 38 years has held several important positions like Commissioner, Delhi Police, Special Commissioner (Traffic), Delhi Police, Special Commissioner (Vigilance), Delhi Police, Inspector General, Chandigarh police and DGP, Goa Police. 

Union Agriculture and Farmers Welfare Minister today briefed the press about the achievements of the Ministry during past two years

Union Agriculture and Farmers Welfare Minister today briefed the press about the achievements of the Ministry during past two years

The first priority of the central government was to take up effective initiatives to fight the challenges prevailing in agricultural sector. These challenges have been bifurcated in two parts so as to work on them in mission mode. The government has chalked out a plan to reduce the input cost in the agriculture sector and to provide farmers better return for their produce. Union Agriculture and Farmers Welfare Minister Shri Radha Mohan Singh said that Hon’ble Prime Minister Shri Narender Modi has taken the resolve to double the income of farmers. The government is also giving priority to the enterprises linked to agricultural sector so as to achieve this target. Mr Singh was addressing the Press Conference organized here today.

Government is taking a number of initiatives to minimize the cost of agricultural production. With this goal in mind, 14 crore farmers in the country are being given Soil Health Cards. Apart from this, Paramparagat Krishi Vikas Yojana has been launched to promote organic farming. Neem Coated Urea, improved varieties of seeds and planting material, schemes like Pradhan Mantri Krishi Sinchayee Yojana have been introduced. Farmers are also being provided agricultural loans on concessional rate. The norms related to disaster relief have been altered to help the farmers affected by natural calamities so that they are compensated for the losses appropriately. The discrepancies existing in crop insurance schemes have been removed and a new scheme called Pradhan Mantri Fasal Beema Yojana has been launched.

The Government has taken a historical initiative to provide farmers better return of their produce. The concept of one nation and one mandi – has been taken ahead. Hon’ble Agriculture and Farmers Welfare Minister said that long pending mandi/ marketing reforms process has been accelerated. The pilot project related to e-mandi has been launched in this financial year. Under this, 21 mandis of 8 states have been linked so far. The government is continuously making efforts to bring uniformity in the rules and regulations pertaining to various mandis in various states. Most of the states have expressed willingness to participate in this project. As of now, proposals of 365 mandis in 12 states have been sanctioned. Ministry of Agriculture has set a target of establishing unified e-trading platform in 585 mandis throughout the country by 2018.

The Minister has said that states are expected to rectify three rules and regulation related to mandis. One is to impart permission to e-trade, second is to implement mandi tariff on single window and third is to implement single licence across the state to carry out the trade. So far, 17 states have started working in this direction. The amendment of mandi related rules and regulations will pave way for achieving appropriate price of agricultural produce.

To promote agricultural sector the government has enhanced the allocation to this field from Rs. 15809 crore to Rs. 35984 crore which is more than as double. The government has made an allocation of Rs. 9 lakh crore to provide farmers cheap and concessional loan while accelerating the inflow of agricultural credit. The government has made provision for farmer credit cards as well as relaxation in payment of interests at the time of calamities.

Shri Singh said that Hon’ble Prime Minister Mr. Narendra Modi has chalked out a target to double farmers incomes by 2022. The Ministry of Agriculture and Farmers Welfare is making focused efforts in this direction. The government is also imparting priority to the ancillary areas of agricultural sector. Under this, horticulture, livestock, dairy, beekeeping as well as poultry have been promoted. A new scheme called National AgroForestry has been initiated for planting trees over the meadows. The dairy and fisheries sectors have made greater strides in terms of growth and development. The government has accelerated second green revolution in the North Eastern region to achieve food security in the country which will lead to enhancement in the agriculture productivity on the one hand and on the other will result in improvement of the farmers’ economy in North Eastern region. A number of schemes have been launched to promote the production of pulses and oilseeds so that dependence on imports can be reduced.

Initiative taken by Ministry of Agriculture to increase farmer incomes have begun to show results on ground. A number of important measures have been taken to preserve the agriculture and farmers from the adverse affect of climate change. A number of gao palan schemes have been commenced for for maintaining milk productivity. 35 projects have been approved in 29 states for this purpose. Approvals have also been given to establish 14 Gokul Villages in the states.

To remove the scarcity of manpower in agricultural sector, the government has opened two central agriculture universities, 14 agriculture colleges and various agriculture research institutes. Recruitment of scientists has been increased.

All agriculture science centers established in nearly all rural districts are being equipped with sophisticated and scientific facilities throughout the country. 

India continues to remain a bright spot in world economy with robust macro-economic and fiscal parameters;

India continues to remain a bright spot in world economy with robust macro-economic and fiscal parameters;

Together with GDP growth of 7.9% in Q 4 of 2015-16 and 7.6% in the whole of 2015-16

The Provisional Accounts for 2015-16 have been released by the Government today (31.5.2016). Fiscal Deficit in 2015-16 stands at 3.9% of GDP as estimated both in BE and RE of 2015-16. This is a significant improvement over the Fiscal Deficit of 4.1% in 2014-15 and 4.7% in 2013-14.

Revenue Deficit has also shown significant improvement due to increase in Capital Expenditure of the Central Government. Revenue Deficit which stood at 3.2% of GDP in 2013-14 has improved to 2.9% in 2014-15 and 2.5% in 2015-16. The Capital expenditure has increased substantially to Rs 2,35,253 crore in 2015-16 which is an increase of Rs. 38,572 crore over 2014-15 and Rs.47,578 crore over 2013-14.

Similarly, the Plan Expenditure in 2015-16 is Rs. 4,71,081 crores which is higher by Rs. 8437 crores over the previous year despite substantial increase in share of tax devolution to the States.

The Gross tax collection at Rs. 14,56,887 crore has shown 17% growth as compared to Fiscal 2014-15. The Gross tax collection has improved to 10.74% of GDP (tax-GDP ratio) in 2015-16 as compared to 10.06% in 2013-14. The devolution of tax collections to State Governments in 2015-16 is Rs..5,06,193 crore, which shows an increase of Rs. 1,68,385 crore over the devolution of Rs.3,37,808 crore in 2014-15. In 2013-14 the tax share devolution to the States was Rs. 3,18,230 crore.

Non Tax Receipts are Rs. 2,50,744 crore this year as compared to Rs..1,97,766 crore last year and Rs.1,98,865 crore in 2013-14.

The above highlights clearly indicate that the fiscal parameters are very robust and in line with the Budget projections. Together with GDP growth of 7.9% in Q 4 of 2015-16 and 7.6% in the whole of 2015-16, India continues to remain a bright spot in world economy with robust macro economic and fiscal parameters.

Seminar on International Day of UN Peacekeepers

Seminar on International Day of UN Peacekeepers

On ‘International Day of UN Peacekeeper's’, a joint seminar on “United Nations Peacekeeping : Role and Relevance in Conflict Resolution” was organized at New Delhi by the Centre for Land Warfare Studies (CLAWS) and Centre for United Nations Peacekeeping (CUNPK) along with United Nations Resident Coordinator’s Office.

The event was attended by COAS, members of the diplomatic community, veteran peacekeepers, UN Country Teams, students from prominent universities and Indian Army contingents earmarked for UN deployment.

Gen Dalbir Singh, Chief of Army Staff delivered the inaugural address wherein he applauded the role of UN Peacekeeping Contingents in maintaining peace across the world. He also highlighted India’s achievement as the second largest troop contributing country with deployment of 7695 personnel across the globe. Gen Dalbir also applauded the Indian Peacekeepers, 04 from Army and one civilian, who were awarded the UN ‘Dag Hammarskjold Medal’ this year on 19 May 2016.

Gen Dalbir further highlighted the necessity of the major Troop Contributing Nations in having a say in the mandate, tasks and policy coordination. He added that mandate of peacekeeping forces was transitioning from Peace Keeping to Peace Reinforcement. The COAS also stressed on the requirement for better training to make sure the soldier’s understand the task and the manner in which they are required to operate in actual scenario.

Mr Yuri Afanasiev, United Nations Resident Coordinator in India also read out the UN Secretary General's message, after which homage was paid to the fallen peacekeepers by observing two minutes silence.