Daily Current Affairs for 13th July 2023

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Komagata Maru

Why in NEWS

• Recent news that the Netherlands will return 484 valuable artefacts it looted from Indonesia and Sri Lanka during the colonial period has brought the debate that; Should colonial countries continue to hold on to cultural artefacts and precious objects that were stolen during the period of imperial domination, or acknowledge their misappropriation and return them to their original homelands?

About Komagata Maru Incident

• On May 23, 1914, the Komagata Maru reached Vancouver’s harbour via Hong Kong and Japan carrying 376 prospective South Asian immigrants who hoped to settle in Canada.

• The passengers, however, did not receive a friendly welcome.

• Their arrival provoked massive opposition from the public, and prevalent ideas of race and exclusion held by the majority of the local population led to an outpouring of racial rhetoric and considerable effort to force the ship’s return to India.

• In response to this backlash, the local South Asian community came together to fight the deportation of the passengers.

Canada’s Prime Minister Justin Trudeau in 2016 apologised on behalf of Canada for the actions of his country’s authorities a century earlier in denying permission for the Indian immigrants on the Komagata Maru to land in Vancouver, thereby sending most of them to their deaths.


Finance commission

Why in NEWS

• Recently, Bibek DebRoy has thrown light on the recommendations of finance commissions and why these recommendations remain on paper only.

What is a Finance Commission?

• It is a body set up under Article 280 of the Constitution.

• Its primary job is to recommend measures and methods on how revenues need to be distributed between the Centre and states.


• The Finance Commission has a chairman and four members appointed by the President.

The Finance Commission has the following functions or duties:

• The Commission makes recommendations to the President of India on the distribution of tax proceeds between the Union and the States and the share of each state.

• The Commission also decides the principles that govern the payment of grants-in-aid to states from the Consolidated Fund of India.

• The President of India can also refer any other matter to the Finance Commission in the interest of building a sound financial system.

Reports of Finance Commission

• Under Article 281 of the Constitution, the President of India is required to cause laying of the Finance Commission report before each House of Parliament along with an explanatory note and the action taken by the government on the Commission’s recommendations.

Key recommendations of 15th FC in the report for 2021-26 include:

Share of states in central taxes: The share of states in the central taxes for the 2021-26 period is recommended to be 41%, same as that for 2020-21.

Fiscal deficit and debt levels: The Commission suggested that the centre bring down fiscal deficit to 4% of GDP by 2025-26.

Revenue mobilisation: Income and asset-based taxation should be strengthened.

• GST: The inverted duty structure between intermediate inputs and final outputs present in GST needs to be resolved.

• Financial management practices: A comprehensive framework for public financial management should be developed.

  • An independent Fiscal Council should be established with powers to assess records from the centre as well as states.

• States should amend their fiscal responsibility legislation to ensure consistency with the centre’s legislation, in particular, with the definition of debt.


GST Council

Why in NEWS

• GST Council has recently decided to levy 28% tax on Online gaming, Casinos and Horse racing.

How big is the Online Gaming Market?

• The revenue of Indian mobile gaming industry is estimated to reach 5 Billion USD in 2025.

What is the GST Council?

• The Goods and Services Tax regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016.

• The GST Council – a joint forum of the Centre and the states — was set up by the President as per Article 279A (1) of the amended Constitution.


• The members of the Council include the Union Finance Minister (chairperson), the Union Minister of State (Finance) from the Centre.

• Each state can nominate a minister in-charge of finance or taxation or any other minister as a member.

Council recommendations

• Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as, the goods and services will be subject or exempted from the Goods and Services Tax.

They lay down GST laws, principles that govern the following:

• Place of Supply

• Threshold limits

• GST rates on goods and services

• Special rates for raising additional resources during a natural calamity or disaster

• Special GST rates for certain States

The Functioning of GST Council:

• The Council must have at least 50% members present and to be able to hold a meeting and make recommendations.

• The suggestions made by the council need a three-fourth majority of the members present and voting in the meetings.

• The central government’s vote counts as one-third of the total votes, while the weightage of the states’ total votes are two-thirds.


India Philippines Relations

Why in NEWS

• Recently, the Foreign Ministers of India and the Philippines met at the fifth meeting of the Philippines-India Joint Commission on Bilateral Cooperation, in New Delhi, on June 29.

Key developments in Indo-Philippines relation

• India’s decision to open the resident defence attaché office in Manila

• Boosting cooperation between the Coast Guards of the two countries

• Acquisition of naval assets by Manila under a concessional line of credit from Delhi

• Expansion of training and joint exercises on maritime security and disaster responses, and commencing a maritime dialogue

• The most notable development was on maritime highways such as the South China Sea.

About South China Sea

• The South China Sea is a crucial maritime gateway and junction for shipping between the Pacific and Indian Oceans.

• Any confrontation in the South China Sea, one of the world’s most vital oceans in terms of geopolitics, economy, and strategy, will be a danger to regional and global security.

• As free and stable marine commons are crucial to global trade and economy.

What is South China Sea Issue?

• Territorial disputes in the South China Sea involve conflicting island and maritime claims in the region by several sovereign states, namely Brunei, the People’s Republic of China (PRC), Taiwan (Republic of China/ROC), Indonesia, Malaysia, the Philippines, and Vietnam.

• The disputes involve the islands, reefs, banks, and other features of the South China Sea, including the Spratly Islands, Paracel Islands, Scarborough Shoal, and various boundaries in the Gulf of Tonkin.

• The waters near the Indonesian Natuna Islands, which some regard as geographically part of the South China Sea, are disputed as well.

Legal Proceedings with respect to South China Sea

• The Philippines had submitted a case of arbitration to the Permanent Court of Arbitration (PCA) in order to settle disputes with China.

• The PCA denied China’s assertion that it had historical rights in the South China Sea, and the unanimous decision was unexpectedly in the Philippines’ favour.

• It further stated that any prior claims to resources situated inside the “nine-dash line” were unfounded.

India’s stand on South China Sea issue

• While India reiterated its consistent position on adhering to international law, including the United Nations Convention on the Law of the Sea (UNCLOS), its unambiguous call to respect the 2016 Arbitral Award on the South China Sea is a departure from India’s earlier position.

• India has departed from ‘noted’ to ‘adherence to the 2016 Arbitral Award’ .III


Need to re-visit Consumer Price Index

Why in NEWS

• Recently, Bibek DebRoy, Chairman, Economic Advisory Council has argued to revisit the CPI with changing times and technology.

What is CPI?

• The Consumer Price Index measures the overall change in consumer prices based on a representative basket of goods and services over time.

• The CPI is the most widely used measure of inflation,

How it is calculated?

• In the current CPI (base year 2012), weights of various groups are as follows: food and beverages (45.86); paan, tobacco and intoxicants (2.38); clothing and footwear (6.53); housing (10.07); fuel and light (6.84); miscellaneous (28.32).

What is Inflation?

• Inflation is the rate at which the cost of goods and services rises over time, resulting in a decline in purchasing power.

• It can be expressed as a percentage increase in the average price of a basket of selected goods and services over some period of time.

• Inflation reduces the value of the currency over time, meaning that a unit of currency effectively buys less than it did in prior periods.

Issues with CPI

• The basket of goods that includes torches, radios, tape recorders, CDs, DVDs, audio/video cassettes, and trunks, among some 300 other items which are lesser in use now.

• Tracking these items that no longer hold the same relevance in our consumption patterns

• The real consumption basket of a common Indian is fluid and continually evolving, mirroring the shifts in societal needs, preferences, and economic conditions.

• The weightage of food in the CPI basket has decreased from 60.9 (in 1960) to 57.0 (in 1982) and to 46.2 (in 2001).

Need to Revisit CPI

• This gradual decline indicates that as the economy grows, the proportion of income spent on food decreases. This is a common trend known as Engel’s Law, which suggests that as income rises, the proportion of income spent on food falls, even if the absolute expenditure on food rises.

• These shifts imply that as people’s income rises, they tend to allocate a larger proportion of their spending towards non-¬food items such as housing, education, healthcare, personal care, entertainment, and digital services such as the Internet

• As nations undergo economic advancement and societal progress, a typical trajectory involves diversifying food intake and embracing a broader range of nutrient ¬rich option beyond cereals.

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