DAILY CURRENT AFFAIRS IAS | UPSC Prelims and Mains Exam – 20th July 2024
Archives (PRELIMS & MAINS Focus) ROLE OF THE FINANCE COMMISSION Syllabus Prelims & Mains – POLITY Context: The sixteenth Finance Commission headed by former Niti Aayog Vice-Chairman Arvind Panagariya has begun its work by inviting suggestions from the public on the mandate set for it by the Centre. Background:- The most recent Finance Commission, composed of five members including the chairman, was established in December last year. It is anticipated to present its recommendations by October 2025, which will be applicable for five years starting April 1, 2026. About Finance Commission The Finance Commission is a constitutional body that recommends how tax revenues collected by the Central government should be distributed among the Centre and various States in the country. Article 280 states that : The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier, time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President. The Commission is reconstituted typically every five years and usually takes a couple of years to make its recommendations to the Centre. The Centre is not legally bound to implement the suggestions made by the Finance Commission. How does the Commission decide? The Finance Commission decides what proportion of the Centre’s net tax revenue goes to the States overall (vertical devolution) and how this share for the States is distributed among various States (horizontal devolution). The horizontal devolution of funds between States is usually decided based on a formula created by the Commission that takes into account a State’s population, fertility level, income level, geography, etc. The vertical devolution of funds, however, is not based on any such objective formula. The last few Finance Commissions have recommended greater vertical devolution of tax revenues to States. The 13th, 14th and 15th Finance Commissions recommended that the Centre share 32%, 42% and 41% of funds, respectively, from the divisible pool with States. The 16th Financial Commission is also expected to recommend ways to augment the revenues of local bodies such as panchayats and municipalities. It should be noted that, as of 2015, only about 3% of public spending in India happened at the local body level, as compared to other countries such as China where over half of public spending happened at the level of the local bodies. What are the disagreements between centre and states? States argue that the Centre does not allocate even the recommended funds from the Finance Commissions, which they believe are already insufficient. Analysts point out that, under the Fifteenth Finance Commission, the Centre has devolved an average of only 38% of the funds from the divisible pool to the States, compared to the Commission’s recommendation of 41%. States have complaints about what portion of the Centre’s overall tax revenues should be considered as part of the divisible pool out of which the States are funded. Cesses and surcharges, which do not come under the divisible pool and hence not shared with the States, can constitute as much as 28% of the Centre’s overall tax revenue. The increased devolution of funds from the divisible pool, as recommended by successive Finance Commissions, may be offset by rising cess and surcharge collections. In fact, it is estimated that if cesses and surcharges that go to the Centre are also taken into account, the share of States in the Centre’s overall tax revenues may fall to as low as 32% under the 15th Finance Commission. More developed States such as Karnataka and Tamil Nadu have also complained that they receive less money from the Centre than what they contribute as taxes. Tamil Nadu, for example, received only 29 paise for each rupee that the State contributed to the Centre’s exchequer while Bihar gets more than ₹7 for each rupee it contributes. In other words, it is argued that more developed States with better governance are being penalised by the Centre to help States with poor governance. Critics also believe that the Finance Commission, whose members are appointed by the Centre, may not be fully independent and immune from political influence. Source: Hindu RWANDA Syllabus Prelims – GEOGRAPHY Context: Rwanda’s President Paul Kagame has been re-elected with 99.18% of the vote, the National Electoral Commission said, extending his near quarter-century in office. Background: Rights groups says that election was marred by crack-down on journalists, the opposition and civil society groups , a criticism which government has rejected. About Rwanda Rwanda, officially the Republic of Rwanda, is a landlocked country in the Great Rift Valley of Central Africa, where the African Great Lakes region and Southeast Africa converge. Located a few degrees south of the Equator, Rwanda is bordered by Uganda, Tanzania, Burundi, and the Democratic Republic of the Congo. It is highly elevated, giving it the soubriquet “land of a thousand hills”), with its geography dominated by mountains in the west and savanna to the southeast, with numerous lakes throughout the country. The climate is temperate to subtropical, with two rainy seasons and two dry seasons each year. It is the most densely populated mainland African country; among countries larger than 10,000 km2, it is the fifth-most densely populated country in the world. Its capital and largest city is Kigali. Coffee and tea are the major cash crops that it exports. Tourism is a fast-growing sector and is now the country’s leading foreign exchange earner. The country is a member of the African Union, the United Nations, the Commonwealth of Nations, COMESA, OIF and the East African Community. Although Rwanda has low levels of corruption compared with neighbouring countries, it ranks among the lowest in international measurements of government transparency, civil liberties and quality of life. The population is young and predominantly rural; Rwanda has one of the youngest populations in the world. Source: Reuters SIGNIFICANCE OF THE GULF REGION IN INDIA’S ENERGY SECURITY Syllabus Mains – GS 2 Context: Today, India is the world’s third-largest energy consumer after China and the United States. Given the enormous import dependence for energy needs, relations with Gulf states are crucial. Background: A seamless energy supply is crucial to ensure energy security, which means meeting
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