Current Affair 1:

Currency in Circulation reached a new high

Post the imposition of lockdown due to COVID-19, there has been a fall in the digital transactions for April’2020. In this story, we take a look at the various trends and indicators relating to currency in circulation.

The Data is taken from: Weekly Statistical Supplement provided by RBI under “Reserve Money Components & Sources”

Currency in circulation at the end of 2020 is 22% more than last year

As per the Weekly Statistical Supplement provided by RBI under “Reserve Money Components & Sources”, the total Currency in Circulation as of 01 January 2021 was Rs. 27.7 lakh crores.  By the end of the previous year, the Currency in Circulation (CiC) was Rs.22.7 lakh crores. In other words, the CiC increased by around 22% in one year.

Currency with Public has increase during lock down and after

As per RBI’s definition, Currency with Public is “Currency in Circulation” minus “Cash with Banks”.

Around the time a nationwide wide lockdown was announced, the total currency in circulation was Rs. 24.39 Lakh crores (as of 27 March 2020).  Of this, 96% i.e., Rs. 23.41 lakh crores were “Currency with the Public” and the balance of Rs. 97.5 thousand crores were the Cash with the banks.  As per RBI’s definition, Currency with Public is “Currency in Circulation” minus “Cash with Banks”.

By the end of the year, i.e., as of 18 December 2020, Currency with Public was Rs. 26.82 lakh crores, which is 96.58% of the total currency in circulation. The increase in the CiC and the increase in the proportion of Currency with the public indicates the propensity of the public to retain money in the form of cash.

Currency to GDP ratio is estimated to have increased for 2020-21

The ratio of currency in circulation to GDP takes into account the size of the Indian economy. As any economy grows, the total amount of currency being used in it also grows in absolute terms. Hence, it is important to take the size of the economy into account.

Apart from the goal of reduction in the circulation of cash, a lower Currency-GDP ratio is also stated as one of the intended objectives of demonetization. At the time of demonetization (2015-16), the Currency-GDP ratio of India was 12.1%.

	At the time of demonetization (2015-16)	2016-2017	2018-2019	2019-2020
Currency to GDP ratio	12.1%.	8.7%	11.2%	12%

As per RBI’s annual report for 2019-20, the Currency-GDP ratio has further increased to 12% i.e., reaching the pre-demonetization levels of 2015-16.

The increasing trend on Currency-GDP ratio and the potential spike this year belies the argument that the increase in currency circulation is due to the expansion of the economy.

The cash transfers as part of the government’s Atmanirbhar package could have also contributed to an increase in cash circulation.

 

Current Affair 2:

Advisory for management of Human-Wildlife Conflict

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The Standing Committee of National Board of Wildlife (SC-NBWL) in its 60th meeting held on 05th January has approved the advisory for management of Human-Wildlife Conflict (HWC) in the country. The advisory makes important prescriptions for the States/ Union Territories for dealing with Human-Wildlife conflict situations and seeks expedited inter-departmental coordinated and effective actions.

What advisory says?

Empower Gram Panchayats:

The advisory envisages empowering gram panchayats in dealing with the problematic wild animals as per the section 11 (1) (b) of Wild Life (Protection) Act, 1972.

Provide Insurance: Utilising add-on coverage under the Pradhan Mantri Fasal Bima Yojna for crop compensation against crop damage due to HWC.

Augmenting Fodder: It also envisages augmenting fodder and water sources within the forest areas.

Take Proactive Measures: The advisory prescribes inter-departmental committees at local/state level, adoption of early warning systems, creation of barriers, dedicated circle wise Control Rooms with toll free hotline numbers which could be operated on 24X7 basis, Identification of hotspots and formulation and implementation of special plans for improved stall-fed farm animal etc.

Provide Instant Relief: Payment of a portion of ex-gratia as interim relief within 24 hours of the incident to the victim/family. 

 

 

 

 

 

In the meeting approval was given for including Caracal, a medium sized wildcat into the list of critically endangered species for taking up conservation efforts with financial support under centrally sponsored scheme Integrated Development of Wildlife Habitat

 

Recent Initiatives/Developments:

1. Recently, the Supreme Court (SC) affirmed the right of passage of the Elephants and the closure of resorts in the Nilgiris elephant corridor. It held that it was the State’s duty to protect a “keystone species” like elephants.
2. The Odisha Government has started casting seed balls (or bombs) inside different reserve forest areas to enrich food stock for wild elephants.
3. The Uttarakhand government carried out bio-fencing by growing various species of plants in the areas in order to reduce the man-animal conflict, prevent wild animals from entering residential areas, and protect agricultural crops and livestock in areas adjoining the forests.
4. In 2018, the Uttar Pradesh government has given its in-principal approval to bring man-animal conflict under listed disasters in the State Disaster Response Fund to ensure better coordination and relief during such incidents.
5. In the Western Ghats of India, a new conservation initiative has utilized texting as an early warning system to prevent human-elephant encounters. Elephant tracking collars embedded with SMS chips automatically text nearby residents, warning them of recent elephant movements. 

Current Affair 3:

United States Trade Representative (USTR) slams India’s digital tax

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A number of countries across the world such as Austria, Brazil, the Czech Republic, the EU, France, India etc. have imposed digital tax on the Internet-based non-resident companies such as Amazon, Google, Facebook etc. In this regard, the US government believes that such taxes are basically targeted towards American Companies and hence it has recently started investigations into imposition of such digital taxes.

Apart from that, a number of concerns have also been raised against the imposition of the Digital Tax in India. In this regard, let us focus on the following dimensions:

1. Need for Imposition of Digital Taxes
2. Digital Tax in India- Equalization Levy
3. Expansion in the ambit of Equalization Levy through Finance Act, 2020
4. Concerns raised with respect to recent changes

Rationale behind introduction of Digital Taxes

The existing tax norms have been framed keeping in mind the brick-and-mortar business models. However, these norms are not suitable to regulate online services.

With rapid advancements in the field of big data and AI, the digital companies have been able to harness the user generated data enabling them to earn huge revenues through digital advertisements. In spite of the fact that these companies earn revenue by harnessing the data generated in a particular country, these companies are not obliged to pay adequate taxes in source country. Hence, Equalization Levy has been introduced in the Union Budget 2016 in order to bring such Internet based companies within the ambit of tax.

Details about Equalization Levy

The equalization levy of 6% is applicable to the income accruing to a foreign E-commerce company which is not a resident of India. Any person or entity in India which makes a payment exceeding Rs 1 lakh in a financial year to a non-resident technology company (such as Google) for some B2B (Business to Business) transactions needs to withhold 6% of the gross amount to be paid as equalization levy.

The two conditions to be met to be liable to equalization levy:

1. The payment should be made to a non-resident service provider;
2. The annual payment made to the service provider should exceed Rs. 1 lakh in one financial year.

For example: Let's say an Indian Company XYZ has availed the online advertisement services of Google for its business promotion and has made a payment of Rs. 2 lakhs to Google towards these online advertisement services. Here, the company would be required to deduct Rs 12,000 as Equalisation levy and pay the remaining amount of Rs 1.88 lakhs to Google.

Expansion of Equalisation Levy in Union Budget 2020

The Finance Act, 2020 has inserted a provision to impose Equalisation levy of 2% on the revenues generated through the online sale of goods and services by non-resident e-commerce companies. The Equalisation levy would be applicable only if the aggregate revenues for a non-resident e-commerce companies exceed a threshold of Rs 2 crores.

The new modification introduced in the Finance Act, 2020 has been opposed by the Foreign e-commerce companies on account of following reasons:    

1. Wider Application of Taxation Regime: Earlier, the Equalisation levy was applicable only on the advertising revenue of non-resident companies. Now, this would be applicable on the all the revenue earned through the online sale of goods and services by non-resident e-commerce companies.
2. The scope of the application of Equalisation levy is so wide that it will bring almost all the foreign based technological companies under the tax bracket. This includes e-commerce companies such as Amazon; online streaming/ content service providers such as Netflix, Amazon Prime; online travel aggregators such as Trivago, TripAdvisor etc.
3. Higher Tax Burden: Earlier equalization levy was applicable only on B2B transactions. But now, the new equalization levy would be applicable on every transaction undertaken by non-resident e-commerce companies which includes both B2B as well as B2C transactions.
4. Lack of Distinction between Digital services and Goods/Services provided through Digital Mode: If you watch a movie online on a digital platform such as Amazon Prime, Netflix etc., then it can be considered as Digital service. On the other hand, if you book a movie ticket online through a platform (such as Book My Show) and then watch it in a multiplex, then it cannot be considered as completely Digital Service. Here, the booking platform is providing you with the service of booking a movie ticket through the Digital mode. It is not providing movie as a Digital service.

Hence, such booking platforms are quite distinct from streaming services such as Amazon Prime, Netflix etc. Accordingly, some of the companies have pointed out that it would be unfair to tax the companies that provide Goods/services through Digital mode on par with companies that provide Digital Services. Hence, even though, the Government’s idea is to tax e-commerce transactions, but it may end up taxing even those transactions where Internet is just a medium.

Current Affair 4:

World food price index rises for seventh straight month in Dec

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The Food and Agriculture Organization’s (FAO) food price index averaged 107.5 points in December 2020, up 2.3 points from November 2020.

About Food Prize Index (FPI)

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. Hence, in a way, it could be considered to be similar to Consumer Price Index (CPI) or Wholesale Price Index (WPI) which are used for the measurement of Inflation within Indian Economy. However, FFPI tracks the international prices of the most commonly traded food commodities.

Commodity Groups Covered: 5 commodity groups which include Meat, Dairy, Cereals, Vegetable oil and Sugar. These commodities represent about 40 percent of gross agricultural food commodity trade. They are chosen for their high and strategic importance in global food security and trade.

Weightage Assigned: Each of the Commodity groups is assigned a weightage in proportion to its share in the global trade in agricultural commodities.

Base Year: A three-year period is chosen to minimize the impact of variation in both internationally traded prices and quantities. Earlier, the Base year was 2002-04, but now it has been changed to 2014-16. The base period 2014–16 was chosen as the new base as it was considered the most representative period for most markets in the past ten years.

About the Food and Agriculture Organization:

FAO is a specialized agency of the United Nations that leads international efforts to defeat hunger. World Food Day is celebrated every year around the world on 16th October. The day is celebrated to mark the anniversary of the founding of the FAO in 1945. India released a commemorative coin of Rs. 75 denomination to mark the 75th Anniversary of the FAO (16th October 2020). It is one of the UN food aid organisations based in Rome (Italy). Its sister bodies are the World Food Programme and the International Fund for Agricultural Development (IFAD).

 

Initiatives Taken:

1. Globally Important Agricultural Heritage Systems (GIAHS).
2. Monitors the Desert Locust situation throughout the world.
3. The Codex Alimentarius Commission or CAC is the body responsible for all matters regarding the implementation of the Joint FAO/WHO Food Standards Programme.
4. The International Treaty on Plant Genetic Resources for Food and Agriculture was adopted by the Thirty-First Session of the Conference of the Food and Agriculture Organization in 2001.

Current Affair 5:

Representation of Women in Panchayati Raj

Senior Congress leader from Haryana has asked the Governor of Haryana to annul the provisions in the Haryana Panchayati Raj (Second Amendment) Act, 2020 to declare as arbitrary, irrational, discriminatory and unconstitutional. The Act provides for 50% reservation for women in PRIs.    

Representation of Women in Panchayati Raj (Constitutional Provisions)

1. Panchayat being “Local government”, is a State subject and part of State list of Seventh Schedule of Constitution of India.
2. Clause (3) of Article 243D of the Constitution ensures participation of women in Panchayati Raj Institutions by mandating not less than one- third reservation for women out of total number of seats to be filled by direct election and number of offices of chairpersons of Panchayats.

1. Further, in terms of clause (4) of Article 243D of the Constitution, the offices of the Chairpersons in the Panchayats at the village or any other level shall be reserved for the Scheduled Castes, the Scheduled Tribes and women in such manner as the Legislature of a State may, by law, provide.

According to Ministry of Panchayati Raj, 20 States namely Andhra Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttarakhand and West Bengal have made provisions of 50% reservation for women in Panchayati Raj Institutions in their respective State Panchayati Raj Acts.                                                                                                                                                        

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