Cyclone Sarai batters Fiji

Syllabus subtopic: Important Geophysical phenomena such as earthquakes, tsunamis, Volcanic activity, cyclones etc., geographical features and their location- changes in critical geographical features (including water bodies and ice caps) and in flora and fauna and the effects of such changes.

Prelims and Mains focus: about cyclone Sarai; tropical cyclones: types and formation; India-Fiji relations

News: Tropical Cyclone Sarai (Category 2) was moving slowly away from Fiji on Sunday, leaving two people dead and more than 2,500 needing emergency shelter. The cyclone damaged houses, crops and trees, cut power and forced the cancellation of several flights, stranding holidaymakers visiting the island nation, which is a major tourist draw.

About Tropical cyclones

• A tropical cyclone is a rapidly rotating storm system characterized by a low-pressure centre (eye), a closed low-level atmospheric circulation, strong winds and a spiral arrangement of thunderstorms(cumulonimbus clouds) that produce heavy rain.

• Depending upon its location and strength, a tropical cyclone is referred by different names:

1. Typhoons in Western North Pacific
2. Willy-willies in Australia
3. Baguio in Philippine Islands
4. Hurricanes around North America
5. Taitu in Japan
6. Cyclone in the Indian Ocean.

• A tropical cyclone is formed over the ocean surface because they are like giant engines that use warm, moist air as fuel; that is why they form only over warm ocean water near the equator and not on the equator as Coriolis Force is needed to form cyclone which is not there on the equator. This is the reason tropical cyclones is formed 5 degrees to 10 degrees away from the equator.

• The low-pressure centre in the ocean tends to inward circular flow of air and warm air goes upward as this warm air goes up its temperature goes on increasing. The sky above the ocean has to be clear so as to facilitate vertical rise of warm air. And this rapidly rotating warm air flow is nothing but Cyclone.

Categories of Cyclone

1. Category one (tropical cyclone)

• Negligible house damage. Damage to some crops, trees and caravans. Craft may drag moorings.
• A category one cyclone's strongest winds are GALES with typical gusts over open flat land of 90-125kph.
• These winds correspond to Beaufort 8 and 9 (gales and strong gales).

2. Category two (tropical cyclone)

• Minor house damage. Significant damage to signs, trees and caravans. Heavy damage to some crops. Risk of power failure. Small craft may break moorings.
• A category two cyclone's strongest winds are DESTRUCTIVE winds with typical gusts over open flat land of 125-164kph.
• These winds correspond to Beaufort 10 and 11 (storm and violent storm).

3. Category three (severe tropical cyclone)

• Some roof and structural damage. Some caravans destroyed. Power failures likely.
• A category three cyclone's strongest winds are VERY DESTRUCTIVE winds with typical gusts over open flat land of 165-224kph.
• These winds correspond to the highest category on the Beaufort scale, Beaufort 12 (hurricane).

4. Category four (severe tropical cyclone)

• Significant roofing loss and structural damage. Many caravans destroyed and blown away. Dangerous airborne debris. Widespread power failures.
• A category four cyclone's strongest winds are VERY DESTRUCTIVE winds with typical gusts over open flat land of 225-279kph.
• These winds correspond to the highest category on the Beaufort scale, Beaufort 12 (hurricane).

5. Category five (severe tropical cyclone)

• Extremely dangerous with widespread destruction.
• A category five cyclone's strongest winds are VERY DESTRUCTIVE winds with typical gusts over open flat land of more than 280kph.
• These winds correspond to the highest category on the Beaufort scale, Beaufort 12 (hurricane).

About FIJI

• Fiji, country and archipelago is located in the South Pacific Ocean. It surrounds the Koro Sea about 1,300 miles (2,100 km) north of Auckland, New Zealand.

• The archipelago consists of some 300 islands and 540 islets scattered over about 1,000,000 square miles (3,000,000 square km). Of the 300 islands, about 100 are inhabited. The capital, Suva, is on the southeast coast of the largest island, Viti Levu (“Great Fiji”).

• Fiji is one amongst advanced economies in the Pacific due to an abundance of forest, mineral, and fish resources.

• Today, the main sources of foreign exchange are its tourism industry and sugar exports.

FIJI’s INDIA link

• India’s links with Fiji commenced in 1879 when Indian labourers were brought here under indenture system to work on sugarcane plantations. Between 1879 and 1916 around 60,553 Indians were brought to Fiji. Beginning with early 20th century, Indian traders and others also started arriving in Fiji. In 1920, the indenture system was abolished.
• There are strong cultural links between the countries as nearly half of Fiji's population is of Indian descent.
• Prior to Fiji’s independence in 1970, India had a Commissioner since 1948 to look after the interests of people of Indian origin. It was later upgraded to High Commissioner after independence.
• Fiji’s Prime Minister Ratu Sir Kamisese Mara visited India in 1971 and Prime Minister Smt. Indira Gandhi visited Fiji in 1981.

• Fiji is important to India for stronger engagement in Pacific Islands.

Fall in new FDs at state-run banks a trust deficit issue

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Prelims and Mains focus: about the key findings of the RBI report, about the trust deficit in public banking sector

News: The Report on Trend and Progress of Banking in India released last week had some interesting data on the total amount of term deposits in public sector banks (PSBs). This data suggests people seem to be losing faith in investing their fresh savings in PSBs.

How has the situation changed for PSBs?

Term deposits are popularly known as fixed deposits. Scheduled commercial banks in India had fixed deposits worth a total of Rs. 77.32 trillion as of 31 March. Of this figure, deposits with PSBs amounted to Rs. 51.34 trillion, or around 66%, of the total fixed deposits with banks. Private sector banks, on the other hand, had Rs. 22.07 trillion, or 29%, of the total deposits with banks. The situation has changed dramatically in the last decade, with PSBs losing market share to private sector banks in terms of fixed deposits. In March 2010, PSBs and private sector banks had 79% and 16% of the total deposits, respectively.

What has changed in the past few years?

The above chart plots incremental deposits or the total amount of fresh deposits that have come into banks every year. In 2018-19, a total of ?6.55 trillion came in as fresh deposits. Of this, private banks got ?5.04 trillion, or around 77%, of the total; PSBs got Rs. 72,113 crore, or around 11%. In 2016-17 and 2017-18, private banks accounted for 92% of the total fresh deposits. However, overall fixed deposit inflows into banks in 2016-17 and 2017-18 were considerably lower at Rs. 1.71 trillion and Rs. 2.64 trillion, respectively. The situation wasn’t always like this. PSBs had got around 80.5% of fresh deposits in 2010-11 and around 79% in 2013-14.

What does this tell us about the Indian banking system?

This tells us that in the last few years, people have preferred to invest their fresh savings with private banks. Between March 2015 and March 2019, state-owned banks got a total of Rs. 1.7 trillion as fresh fixed deposits. During the same period, private sector banks got Rs. 10.76 trillion as fresh fixed deposits, the bulk of which came in 2018-19.

Are people losing trust in state-owned banks?

This is basically what the data seems to suggest. Over the last few years some state-owned banks had been put under the Reserve Bank of India’s (RBI) prompt corrective action framework, where limitations were placed on their borrowing and lending activities. This has also played a role in PSBs ending up with fewer deposits. The other worrying bit is the dramatic fall in the amount of fresh deposits coming into banks over the last few years. The total amount of fresh fixed deposits peaked in 2013-14 at Rs. 8.09 trillion.

What does the fall in fresh deposits mean?

This is in line with falling savings in the overall economy. Between March 2015 and March 2019, fixed deposits with banks have grown at single digit rates. This explains why banks have not been able to reduce interest rates despite RBI cutting the repo rate repeatedly. They just don’t have enough fixed deposits. The good news is that fixed deposits grew by 9.2% in 2018-19, against a low of 2.8% in 2016-17.

GST overhaul next on agenda after budget

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Prelims and Mains focus: on the key issues to be discussed regarding the overhaul of GST; the composition scheme: eligibility and its merits

News: The Narendra Modi administration and state governments will hold fresh negotiations to overhaul the goods and services tax (GST) after the Union budget is presented on 1 February, said a government official familiar with the development.

Key issues to be discussed

• Finance ministers of central and state governments will discuss restructuring GST slabs and rates as well as ways to handle a revenue shortfall and the GST compensation to states in the year starting 1 April.
• The discussions between the Centre and states will revolve around finding a middle ground to fix the structural flaws that have resulted in a significant shortfall in tax collections.
• The discussions will address the larger question of what should be done when the Centre does not receive enough revenue to compensate states for their GST-related losses, a vital issue on which Centre-state relations and the stability of GST rest.

Challenges

• Tax cuts and exemptions granted in several rounds since the rollout of GST have made it revenue-deficient rather than revenue-neutral, as was originally planned.
• Tax cuts on consumer goods have also led to a situation where businesses are paying more taxes on raw materials than on finished products and subsequently claiming the excess paid as refunds.
• Experts warned that any major change in the GST structure could unsettle the industry. It would be prudent to allow the economy to stabilize before embarking on any changes as businesses would prefer stability and certainty in tax policies when they are grappling with global economic head- winds.

What is on the anvil in next year’s budget?

• The budget is expected to implement the recommendations of the Fifteenth Finance Commission (FFC), which submitted its interim report to President Ram Nath Kovind and finance minister Nirmala Sitharaman earlier this month.
• The report focuses on sharing of tax revenue between Union and state governments. If the tax revenue that the Centre shares with states comes down in FY21 from the present 42% of the revenue pool, it could result in a showdown between the two.
• The Centre is keen that states take a cut in their compensation dues, something states have resisted. The way this issue is settled will have an impact on the final report of FFC for the five years ending FY26. FFC’s suggestions made to the GST Council in September on states taking a cut in compensation did not receive an enthusiastic response from state ministers.

Key takeaways from the GST Council meeting this month

• At the GST Council’s meeting on 18 December, officials made a presentation on revenue trends and suggestions on rejigging tax rates and slabs, but the council decided against taking it up due to the economic slowdown.
• States were not keen on the proposal as it would lead to a rate increase on items in lower slabs, which could impact the common man.
• The council had concluded in its last meeting that raising the rate of cess on items in the highest slab of 28% will not be sufficient to raise revenue to meet the shortfall.
• However, items such as perfumes, cosmetics and vacuum cleaners that were moved from the 28% slab to the 18% slab could become a target of any rate increase in future discussions.
• The decisions taken so far in terms of rate cuts and other relief given to businesses and traders have led to the exchequer forgoing about Rs. 1 trillion a year. These include:

1. raising the threshold for GST registration from Rs. 20 lakh to Rs. 40 lakh;
2. raising the limit for the composition scheme from Rs. 75 lakh to Rs. 1.5 crore;
3. and lowering the tax rate under that scheme for producers from 2% to 1%.

What is the composition scheme under GST?

• The composition scheme is an alternative method of tax levy under GST designed to simplify compliance and reduce compliance costs for small taxpayers.
• The main feature of this scheme is that the business or person who has opted to pay tax under this scheme can pay tax at a flat percentage of turnover every quarter, instead of paying tax at a normal rate every month.

Eligibility for this scheme

• The composition scheme is applicable to manufacturers or traders whose taxable business turnover is up to Rs.1.5 crore (Rs.75 lakh in the case of North-Eastern States). A service provider can opt for the scheme if his taxable turnover is up to Rs. 50 lakh.
• However, businesses with inter-State supplies, manufacturers of ice cream, pan masala and tobacco, and e-commerce players cannot opt for the composition scheme.
• To be eligible for the composition scheme, the registered taxpayer must provide a declaration on the GST portal before the beginning of each financial year and not anytime during the year.

Tax rates under the composition scheme

• The applicable tax rates under the composition scheme are 1 per cent (0.5 per cent Central GST and 0.5 per cent State GST) of turnover in case of manufacturers and traders, 5 per cent in the case of restaurants (not serving alcohol) and 6 per cent for other service providers.
• The tax is to be paid from tax payer’s own pocket without charging it to the customer. The words “composition taxable person, not eligible to collect tax on supplies” should be mentioned at the top of every bill issued by him.

Why is it important?

• There are over 63 million Micro, Small and Medium Enterprises (MSMEs) in the country that created 110 million jobs and contributed about 29 per cent of the country’s economic output, as per the National Sample Survey (NSS) 73rd round conducted during 2015-16.

• The composition scheme effectively acknowledges the importance of the MSME sector, by granting relief to it on GST filings, procedures and tax rates. As of October 1, 2018, there were 17,65,684 composition dealers amounting to about 16 per cent of registered taxpayers under GST. The number is expected to go up with the recent increase in the threshold from Rs.1 crore to Rs.1.5 crore and the inclusion of service providers.

• Under the composition scheme, the taxpayer can skip monthly returns and furnish only one return i.e. GSTR-4 on a quarterly basis by 18th of the month following end of the quarter and an annual return in GSTR-9A by December 31 of the next financial year. A dealer registered under the composition scheme is also not required to maintain detailed records.

What about its drawbacks?

• The drawbacks of this scheme are that the taxpayer cannot be involved in inter-State transactions, imports or exports.
• Also, the buyer transacting with a seller registered under the composition scheme will not get the benefit of the input tax credit, which impacts the former’s sales.

What is Input Tax Credit?

Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs.

Say, you are a manufacturer –

• tax payable on output (FINAL PRODUCT) is Rs 450
• tax paid on input (PURCHASES) is Rs 300

You can claim INPUT CREDIT of Rs 300 and you only need to deposit Rs 150 in taxes.

CDS: Govt notifies retirement age at 65

Syllabus subtopic: Various Security forces and agencies and their mandate

Prelims and Mains focus: About the Chief of Defence Staff; its mandate, role and significance

News: The Central government on Saturday notified the retirement age for the newly created post of the Chief of Defence Staff (CDS) as 65 years, which will be three years more than the retirement age of the three service chiefs.

• The service chiefs, when appointed, are usually given a tenure of three years or till they attain the age of 62 years, whichever is earlier. There is no mention of a fixed tenure in the gazette notification stating the retirement age for the CDS.

Chief of Defence Staff (CDS)

• The Union Cabinet had cleared the appointment of the CDS on December 24 in a four-star rank at par with the three service chiefs. He would be responsible for achieving “jointness in operation, logistics, transport, training, support services, communications, repairs and maintenance of the three services” within three years of assuming office.

• The CDS will also serve as the permanent chairman of the Chiefs of Staff Committee (COSC) which comprises the three service chiefs. So far, the chairmanship of the COSC has not been permanent and is held in rotation by the senior-most service chief, which has caused problems of inadequate attention and short tenures as Chairman, COSC.

• General Bipin Rawat, the outgoing Army Chief, who retires on December 31, is seen as the frontrunner to be named as the first CDS. As the seniormost service chief, he holds the post of Chairman, COSC, which he was scheduled to hand over to the Navy Chief Admiral Karambir Singh on Friday.

• But the Defence Ministry announced at the last minute that the ceremony had been postponed to December 31. The sudden postponement of the ceremony led to speculation that an announcement of the name of the new CDS was expected in the next couple of days.

• A shortlist of five officers is believed to have been prepared by the ministry for the cabinet committee on appointments to take a decision. It has been assumed that as the biggest service among the three, the Army will have the first CDS and this may subsequently be rotated among the two other smaller services.

Way forward

The creation of the post of CDS is a long-awaited higher defence reform and giving the incumbent a stable tenure is a healthy move. The role and charter of the CDS has also been defined with a view to spur further defence reforms.

President confers Dada Saheb Phalke Award to Amitabh Bachchan

President Ram Nath Kovind conferred Dada Saheb Phalke Award to Amitabh Bachchan at a function held at Rashtrapati Bhavan on December 29, 2019. Dadasaheb Phalke Award is India's highest film honour.

Dadasaheb Phalke Award

The Dadasaheb Phalke Award is the highest film honour in India. It is conferred annually by the Directorate of Film Festivals, under the Union Ministry of Information and Broadcasting.

The recipient of the prestigious honour is selected by a committee consisting of eminent film industry personalities. The award comprises a 'Swarna kamal' medallion, a shawl and a cash prize worth Rs 1,000,000.

The award was established by the Union Government to honour Dadasaheb Phalke's immense contribution to Indian cinema. Dadasaheb Phalke, known as the father of Indian cinema, directed India's first full-length feature film, Raja Harishchandra in 1913.