29 July 2023 : The Hindu Editorial Notes PDF
The Hindu Editorial
29-July-2023
Daily Current Affairs For UPSC ,The Hindu Editorial Summary
1. Charting the path for the Sixteenth Finance Commission.
Topic: GS2 – Indian polity.
Context:
- Sixteenth Finance Commission to be established soon.
- The 16th finance commission must consider significant changes since the Fifteenth Finance Commission in November 2017:
- Impact of COVID-19 pandemic and subsequent geopolitical challenges.
- Combined government debt-GDP ratio rose to nearly 90% by the end of 2020-21.
- Many states facing substantial fiscal imbalances.
The vertical and horizontal dimensions:
- Fourteenth Finance Commission raised States’ share in divisible pool of central taxes to 42% (previously 32%).
- Share was revised to 41% when the number of States reduced to 28.
- Centre managed situation by withdrawing Planning Commission grants after its abolition.
- Sixteenth Finance Commission should re-examine role of non-shareable cesses and surcharges.
- Effective share of States in Centre’s gross tax revenues averaged close to 31% (2020-21 to 2023-24 BE), lower than 35% (2015-16 to 2019-20).
- Heavy reliance on cesses and surcharges: requires scrutiny; an upper limit of 10% on their share may be recommended.
- GST collection: GST collections have maintained good buoyancy in the last two years but need restructuring.
- States’ share determined by indicators: population, per capita income, area, and incentive-related factors.
- Equalisation principle should be prioritised: for education and health services; limited criteria like population, area, and distance can guide resource transfers, supplemented by grants.
- This same Equalisation principle used in federations like Canada and Australia, promoting equity and efficiency.
Recommendations:
- Combined debt-GDP ratio for central and State governments peaked at 89.8% in 2020-21.
- Centre’s debt-GDP ratio (excluding lending to States) was 58.7%, and States’ debt-GDP ratio was 31%.
- These figures are above the FRBM norms of 40% for the Centre and 20% for States (as per the 2018 amendment).
- Centre’s fiscal deficit was 9.2% of GDP in 2020-21, and States’ fiscal deficit was 4.1% of GDP.
- Reduction of States’ debt-GDP target to 20% necessitates re-examination of the 2018 amendment to the Centre’s FRBM.
- Fifteenth Finance Commission recommended re-examining the 2018 amendment.
- Twelfth Finance Commission recommended a debt-GDP target of 28%, aligned with 12% nominal GDP growth.
- Adjustment needed for the central government is larger than that for State governments.
- Some States have relatively larger debt and fiscal deficit relative to their Gross State Domestic Product (GSDP).
- States’ mindless expenditure: Concerns related to the proliferation of subsidies and re-introduction of old pension scheme in States without clear identification of financing sources, leading to fiscal burdens – Often, subsidies are financed by raising the fiscal deficit.
Reforms worth considering:
- The Twelfth Finance Commission recommended the establishment of a loan council to oversee loan magnitudes and profiles of central and State governments.
- The Sixteenth Finance Commission should consider examining non-merit subsidies in detail.
- Exclusion of ‘unjustified’ subsidies while determining grants may lead to political controversies.
- The Finance Commission should be strict about States maintaining fiscal deficit within limits.
- Carrots should be provided to States adhering to fiscal deficit limits (e.g., by considering fiscal performance in horizontal distribution).
- Sticks should be applied to States exceeding fiscal deficit limits (e.g., by restricting borrowing levels).
2. Climate change calls for a renewed sense of urgency.
Topic: GS3 – climate change.
Context:
- UN Secretary-General António Guterres warns of a climate catastrophe and refers to the earth entering an “era of global boiling”.
Why in news?
- July 2023 is expected to be the hottest month in the last 12,000 years.
- Scientific evidence indicates an unprecedented rise in global temperatures.
- July 2023 saw the hottest three-week period on record, with an average temperature of 16.95°C, 0.2°C warmer than July 2019, based on EU observational data.
- Ocean temperatures are rising, and the Central Equatorial Pacific Ocean is transitioning from La Niña to El Niño conditions, resulting in warmer temperatures worldwide.
- Recent extreme weather events: include temperature reaching 52°C in northwest China, wildfires in Greece, and severe heat in the United States’ Southwest.
- High rains in north and western India are attributed to monsoon conditions and warm air increasing atmospheric moisture capacity, leading to floods and devastation.
- Guterres states that limiting global temperature rise to 1.5°C is still possible but requires immediate and dramatic climate action.
- COP28 President-designate, Sultan Ahmed Al Jaber, calls for more ambitious emission cuts from the world’s largest economies at a G-20 ministerial meet.
- India may face pressure to advance its net zero commitments from 2070 to 2050 and generate fossil-free electricity by 2040.
- Climate negotiations hinge on these critical points, but climate change waits for nobody.
Significance: Data can be used in mains answer on climate change
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