23 September 2024 : Indian Express Editorial Analysis

1. In our defence

(Source: Indian Express; Section: The Editorial Page; Page: 10)

Topic: GS3– Internal Security

Context:

The article discusses Defence Minister Rajnath Singh’s initiative to establish the Joint Commanders’ Conference (JCC) as a platform for strategic military deliberations, while highlighting ongoing challenges in India’s military modernization, personnel shortages, and preparedness.

The Importance of the Joint Commanders’ Conference (JCC)

• Defence Minister Rajnath Singh’s initiative to establish the Joint Commanders’ Conference (JCC) is a commendable step toward enhancing the coordination between India’s top military commanders.
• The JCC allows for extended discussions on national security, providing a platform for informed deliberations.
• The first such conference, held in Lucknow on September 5, was a landmark moment, during which Singh emphasized the need for India, a peace-loving nation, to maintain military readiness in order to preserve peace.
• This aligns with the fundamental role of the military—to prepare for war to secure national sovereignty.

Complementary Role to the Combined Commanders’ Conference (CCC)

• The JCC is set to complement the Combined Commanders’ Conference (CCC), which is chaired by the Prime Minister and has traditionally focused on high-level strategic matters.
• Until recently, the Defence Minister’s involvement in the CCC was limited to a single session, leaving higher strategic discussions primarily under the purview of the Prime Minister.
• However, since 2014, under PM Modi, the CCC has taken on a more politicized tone, sometimes being utilized for electoral purposes.
• While the CCC continues to play an important role, the JCC creates a distinct and valuable space for the Defence Minister to engage with the military leadership in a more focused, non-political context.

Challenges in Military Modernization and Transformation

• Despite these efforts, India’s military faces significant challenges in terms of modernization and equipment. While the theme of the inaugural JCC, “Transforming the Armed Forces,” aligns with the Modi government’s priorities, progress in this domain has been slow.
• The 2018 review by the Standing Committee on Defence highlighted that a large proportion of the Indian Army’s equipment is outdated.
• The report emphasized that ideally, one-third of military equipment should be state-of-the-art, but the reality is that 68% of the Army’s equipment falls into the vintage category.
• This imbalance, alongside similar shortfalls in the Navy and Air Force, underscores the need for more attention to modernization efforts.

Impact of Economic Constraints and Strategic Autonomy

• One major obstacle to India’s military modernization is economic constraints.
• The rupee’s depreciation from Rs. 62.33 to Rs. 83.47 against the U.S. dollar between 2014 and 2023 has reduced the country’s purchasing power for foreign military supplies, a critical factor given India’s reliance on imported equipment.
• While PM Modi’s push for indigenization under the “Aatmanirbhar Bharat” initiative is commendable, its slow progress means that India will continue to depend on foreign imports for the foreseeable future, undermining its strategic autonomy.

Personnel Shortages and the Agnipath Scheme

• The issue of manpower shortage further complicates military readiness. As of 2023, there was a deficit of approximately 1.55 lakh personnel across all three services, with the Army accounting for 1.36 lakh of these vacancies.
• The introduction of the Agnipath scheme, designed to revamp recruitment, has faced significant criticism and may have exacerbated these issues.
• A comprehensive review of the scheme is expected, as it has raised concerns about long-term implications for the military’s personnel strength and operational effectiveness.

Need for Transparency and Objective Reviews

• The JCC represents a timely platform for the Defence Ministry to address the pressing issues of equipment shortfalls, personnel shortages, and military modernization.
• The material state of India’s armed forces remains largely opaque, and the military needs to be more transparent about its internal challenges.
• The failure to convene CCC meetings in critical years such as 2019 and 2022, along with the tendency to gloss over fundamental issues, suggests a need for more rigorous and objective internal reviews of military preparedness.

Strategic Implications and Future Outlook

• In light of increasing threats, such as the Galwan conflict of 2020 and rising cross-border terrorism, India must prioritize credible military preparedness over mere optics.
• The JCC provides an important venue for such discussions, but meaningful transformation will require sustained focus on modernization, better resource allocation, and a reduction in political overhang.
• While the government has made significant strides, including in the areas of pensions and indigenization, the full benefits of these initiatives remain distant.
• A more robust and transparent approach will be crucial to ensuring India’s long-term national security.

What is Chief of Defence Staff (CDS)

Background:  Its creation was recommended in 2001 by a Group of Ministers (GoM) that was tasked with studying the Kargil Review Committee (1999) report. After the GoM recommendations, in preparation for the post of CDS, the government created the Integrated Defence Staff in 2002, which was to eventually serve as the CDS’s Secretariat. In 2012, the Naresh Chandra Committee recommended the appointment of a Permanent Chairman of the Chiefs of Staff Committee as a midway to eliminate apprehensions over the CDS. Finally, the post of CDS was created in 2019 on the recommendations of a committee of defence experts headed by Lt General DB Shekatkar. General Bipin Rawat was the first CDS in the country and was appointed on December 31, 2019.

Practice Question:  Discuss the significance of the Joint Commanders’ Conference (JCC) in enhancing India’s national security framework and critically analyze the challenges faced by the Indian Armed Forces in terms of modernization, personnel shortages, and strategic autonomy. (250 words/15 m)

 2. A grand GST bargain     

(Source: Indian Express; Section: The Ideas Page; Page: 10)

Topic: GS3– Indian Economy

Context:

The article discusses the extension of the GST compensation cess, the repayment of loans taken during the Covid-19 pandemic, and the potential future transformation of the cess, including bringing petroleum products under the GST framework.

GST Compensation Mechanism and Its Extension

• The Goods and Services Tax (GST) regime, introduced in July 2017, included a provision to compensate states for any revenue loss, ensuring a 14% annual growth from their 2015-16 revenue levels.
• This compensation was funded by a cess on specific goods and was initially meant to last for five years. However, due to the financial strain caused by the Covid-19 pandemic, the levy was extended until March 2026 to service loans raised during the crisis.
• During the period from 2017 to 2023, Rs. 8.8 trillion was transferred to states, with a significant portion going to larger states such as Maharashtra, Karnataka, and Punjab.

Repayment of GST Compensation Loans

• In the 54th GST Council meeting held in September, the government announced its plan to repay the entire Rs. 2.7 trillion compensation loan by January 2026, ahead of the cessation of the compensation period.
• A surplus of around Rs. 480 billion is expected after loan repayments and interest payments.
• This financial management indicates a surplus beyond the compensation needs, allowing the government to consider other potential uses for these funds.

Future of the Compensation Cess Post-March 2026

• The GST Council is now tasked with evaluating the future of the compensation cess beyond March 2026. Since the original purpose of the cess is no longer relevant, a Group of Ministers will be formed to study whether the cess should continue in a different form, potentially requiring a constitutional amendment.
• If discontinued without replacement, the effective tax rates on demerit goods, such as cigarettes and SUVs, would drop significantly, which is unlikely, as the government may want to maintain high tax rates to discourage consumption.

Possible Transformation of the Compensation Cess

• One option being considered is converting the compensation cess into a “green cess” to fund green infrastructure projects and support India’s energy transition to meet its 2030 climate goals.
• The council would need to decide how this new cess would be shared between the central and state governments, as well as how to allocate the funds across states.
• The standard finance commission devolution formula may not be the best approach for this distribution.

Bringing Petroleum Products Under GST

• Petroleum products, including oils and lubricants, currently remain outside the GST framework. Including them would allow businesses to claim input tax credit, reducing costs and enhancing competitiveness.
• However, states enjoy some fiscal autonomy through their ability to set varying tax rates on these products, leading to different retail prices across the country.
• Bringing petroleum products under GST would further reduce states’ fiscal autonomy, so convincing them to agree to this transition would require a significant negotiation, possibly offering compensation through cess proceeds.

Conclusion

• The future of the GST compensation cess remains under consideration, with potential changes like the introduction of a green cess on the horizon.
• Meanwhile, integrating petroleum products into the GST regime could prove challenging without offering states some form of compensation to protect their fiscal interests.
• The evolution of GST policies will play a key role in shaping India’s economic landscape, balancing revenue generation, state autonomy, and environmental objectives.

What are the Current Major Challenges Related to GST in India?

Complexity and Compliance Burden:  GST in India has a complex structure with multiple tax slabs, leading to increased compliance requirements. This complexity poses a challenge for businesses, especially smaller enterprises, in understanding and adhering to the diverse regulations. Technology and Infrastructure Readiness:  The successful implementation of GST relies heavily on robust technological infrastructure. Issues such as lack of technological readiness among businesses, and disparities in technology adoption can hinder the seamless functioning of the GST network. Input Tax Credit (ITC) Verification: The government authorities have recently identified and busted more than 29,000 bogus firms involved in evading GST dues. Multiple Registrations Across States: Businesses operating in multiple states must register separately in each state for GST compliance. This multiplicity of registrations adds administrative burden and increases compliance costs for businesses with a pan-India presence, contributing to logistical challenges.

PYQ: Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions? (UPSC CSE (M) GS-3 2020)

Practice Question:  Critically examine the impact of the GST compensation cess on state revenues and analyze the potential challenges and opportunities of transforming it into a green cess post-2026. (250 words/15 m)