GS Analyst: Daily Current Affairs

The World Health Organization (WHO) has reported a resurgence of polio globally, with cases and environmental samples of polio virus detected in several countries.

Global Spread of Polio:

• Wild poliovirus cases have decreased by over 99% since 1988, from an estimated 350 000 cases in more than 125 endemic countries to 12 reported cases in 2023.
• Of the 3 strains of wild poliovirus (type 1, type 2 and type 3), wild poliovirus type 2 was eradicated in 1999 and wild poliovirus type 3 was eradicated in 2020.
• As of 2024, endemic wild poliovirus type 1 remains in two countries: Pakistan and Afghanistan.
• However, the virus has been found in wastewater samples from countries like Finland, Germany, Poland, Spain, and the UK. While no confirmed human cases have been reported in these countries, the detection of the virus highlights the ongoing risk of polio despite high vaccination coverage.
• In addition to European countries, cases of wild poliovirus (WPV) and vaccine-derived poliovirus (cVDPV) have been detected in countries like Pakistan, Cameroon, Cote d'Ivoire, Chad, and Nigeria.
• The virus has been found in sewage samples in cities such as Barcelona (Spain), Warsaw (Poland), and several cities in Germany and the UK.
• Notably, these viruses are genetically linked to strains from countries like Nigeria.
• Ongoing Surveillance and Vaccination: WHO continues to emphasize the importance of surveillance and vaccination.
  • Despite high vaccination coverage (85-95% of children receiving polio vaccines), there are pockets of undervaccination in certain areas, leaving gaps in immunity that can allow the virus to spread.
  • These gaps must be addressed through targeted vaccination campaigns and continuous monitoring of immunity levels.

The Debate Over Polio Vaccines:

• Role of Oral Polio Vaccine (OPV): The oral polio vaccine (OPV) has been a key tool in the global effort to eradicate polio.
  • It is a live-attenuated vaccine, meaning it uses a weakened form of the virus to stimulate immunity.
  • OPV has been effective in large-scale immunization campaigns, especially in low-resource settings.
  • However, OPV has a downside: in rare cases, it can lead to vaccine-derived polio (cVDPV), where the weakened virus in the vaccine mutates and causes new polio outbreaks.
• Shift in Transmission Theory: For years, polio was thought to primarily spread through the faecal-oral route—when contaminated feces from an infected person are ingested, often through dirty water or food.
  • This led to the widespread use of OPV. However, recent research suggests that respiratory transmission—through coughing or sneezing—may play a larger role in spreading the virus than previously thought.
  • This theory challenges the long-held belief in the faecal-oral route as the dominant mode of transmission.
• Case for Injected Polio Vaccine (IPV): A recent report argues that respiratory transmission might be the main way polio spreads, particularly for wild poliovirus (WPV) and vaccine-derived poliovirus (cVDPV).
  • They suggest that injectable polio vaccine (IPV), which is non-transmissible (unlike OPV), should be used exclusively for polio eradication.
  • IPV is injected rather than taken orally, and does not carry the risk of vaccine-derived polio. The OPV-to-IPV switch should be accelerated globally to effectively eradicate polio.

Ahead of the Delhi Assembly elections in 2025, the longstanding power struggle between the Delhi government, led by the Aam Aadmi Party (AAP), and the Union government is intensifying once again.

How Delhi’s Governance Structure Was Established

• Pre-Independence: In 1947, as India was about to gain independence, the Constituent Assembly discussed the structure of Delhi’s governance. Delhi was made a Union Territory (UT), directly controlled by the Central government.
• 1991 - The Change: After India’s Constitution was amended in 1991, Delhi got a Legislative Assembly (like a state) under the National Capital Territory (NCT) Act. However, key areas like public order, police, and land remained under the control of the Central government. This made Delhi a special kind of Union Territory with some autonomy.
• The Power Struggle After 2015: In 2015, the Union government issued a notification removing Delhi’s control over services and gave more powers to the Lieutenant Governor (LG). The Delhi government protested, claiming that this undermined the elected government of Delhi.

Key Court Rulings and Legal Battles

• Delhi High Court (2016): The Delhi High Court ruled that the LG is the "administrative head" of Delhi, meaning the Union government has the final say over key matters like services. The Court said that Delhi continues to be a Union Territory and the Delhi Legislative Assembly has limited powers.
• Supreme Court Ruling (2018): In 2018, the Supreme Court ruled that the Lieutenant Governor must act based on the aid and advice of the Delhi Council of Ministers for most matters, except for areas like public order, police, and land. This was a win for the Delhi government, as it said the LG’s role should be limited to consultation, not concurrence.
• Union Government’s Response: Despite the Supreme Court’s ruling, the Union government passed the Government of National Capital Territory (Amendment) Act, 2021. This Act expanded the LG's powers, giving him more control, especially over the services and other matters. The Act also allowed the LG to have a say in Bills passed by the Delhi Legislative Assembly, undermining the Delhi government’s authority.

The 2023 Developments: New Ordinance and Legislation

• 2023 - Supreme Court’s Judgment: In 2023, the Supreme Court gave another verdict that returned control over services to the Delhi government, ruling that the LG cannot have independent powers in matters of services like the posting of officers.
• Union Government’s Response (2023): In response, the Union government passed an Ordinance (a temporary law) to again take away control over services from the Delhi government. The Ordinance created the National Capital Civil Services Authority, a body made up of the Chief Minister of Delhi, Chief Secretary, and Principal Secretary. This body would recommend decisions on transfers, postings, and disciplinary actions of Delhi's civil servants to the LG, who would have final discretion over these matters.
• The 2023 Bill: In August 2023, the Union government introduced the Government of National Capital Territory (Amendment) Bill, 2023. The Bill was passed by Parliament and received the President's assent in August 2023. It confirmed the LG’s powers over Delhi’s administration, even more than before.
  • The Delhi government has challenged the 2023 Ordinance and the Amendment Bill in the Supreme Court. The matter is still pending, and the Supreme Court has yet to give a final decision on whether the Ordinance and the new law are constitutional

Why is this issue so important?

• Delhi’s Special Status: Delhi is not just any state or Union Territory; it is the national capital of India. The Constitution gives Delhi special provisions under Article 239AA, creating a unique relationship between the Delhi government and the Union government.
• Key Areas of Dispute: The core issue is about who controls the administration of Delhi.
  • The Delhi government argues that it should have full control over Delhi’s civil services and should be able to make decisions without interference from the Central government.
  • The Union government, on the other hand, claims that because Delhi is the national capital, it should maintain significant control over key matters, including services, law enforcement, and land management.

India's fisheries and aquaculture sector is in the spotlight as the country continues to experience significant growth in fish production.

Current state of India's fisheries and aquaculture sector

• India's fisheries and aquaculture sector has grown significantly in recent years, contributing to the livelihoods of approximately three crore fishers and fish farmers.
• The country's fish production reached a record 175 lakh tons in 2022-23, marking an 83% increase in production since 2013-14.
• A significant portion of this production (about 75%) comes from inland fisheries, making India the second-largest fish and aquaculture producer in the world.
• Given this, improving the extension services that support fishers and fish farmers is crucial to ensure the sustainable growth of the sector.

Role of Extension Services in Fisheries and Aquaculture

Extension services are critical for disseminating knowledge and providing technical support to fishers and fish farmers. These services should focus on:

• Offering request-based support regarding the life cycle of improved species, water quality, disease management, and rearing technologies.
• Addressing the needs of seed growers and hatcheries to enhance productivity.
• Providing need-based training to promote sustainable practices and fisheries-based business models.

Critical extension initiative

Matsya Seva Kendras, Sagar Mitras, and digital platformslike AquaBazaar are pivotal in delivering technical support and capacity building to fishers and fish farmers.

• Matsya Seva Kendras (MSK):  Under the Pradhan Mantri Matsya Sampada Yojana (PMMSY), the government has introduced Matsya Seva Kendras (MSKs) to enhance fisheries extension services. These Kendras are envisioned as one-stop solutions for fishers and fish farmers, offering a range of services delivered by trained aquaculture professionals.
•   Key Features of Matsya Seva Kendras:
  • Support for Women and Weaker Sections: The government provides 60% financial assistance to set up MSKs targeting women and marginalized communities.
  • Services Offered: MSKs provide a variety of services, including water quality testing, disease diagnosis, capacity building, and technology infusion for better fish farming.
    • For example, the MSK in Thrissur, Kerala has a laboratory for water, soil, and microbial analysis, and provides disease testing based on requests.
    • The MSKs in Nasik and Sangli (Maharashtra) focus on capacity building related to seed and feed inputsand the use of new technologies.
  • Community and Cooperative Engagement: The government encourages MSKs to engage with start-ups, cooperatives, producer organizations, self-help groups, and joint liability groups to foster knowledge-sharingand the adoption of sustainable fishing practices.

• Impact of MSKs: MSKs aim to promote a “whole of government” approach, meaning a collaborative effort across various government and community sectors to address challenges like climate change and improve fisheries management. They play a pivotal role in promoting conservation and regenerative practices in both inland and marine
• Sagar Mitras: Connecting Sea-Borne Fishers: Another critical extension initiative is the deployment of Sagar Mitras, or sea helpers, in coastal regions of India. These individuals act as an interface between the government and sea-borne fishers, providing essential support and information.
•   Key Functions of Sagar Mitras:
  • Data Collection: Sagar Mitras gather and compile data on daily marine catches, price fluctuations, and marketing needs at fish landing centers and harbours.
    • Information Dissemination: They relay vital information to fishers about:
    • Local regulations
    • Weather forecasts
    • Natural calamities
    • Hygienic fish handling practices
    • Fishing zones in the seas
  • This real-time support helps fishers adapt to changing market conditions and weather, ensuring better productivity and safety.

Improving Extension Services in Fisheries

To make fisheries extension services more effective and accessible, two main strategies are recommended:

• Institutional Convergence: There is a need to integrate the Matsya Seva Kendras with the existing extension networks, such as the Krishi Vigyan Kendras (KVKs) of the Indian Council of Agricultural Research (ICAR)and the State extension services. This will create a more efficient, broad-reaching extension system across the country.
• Digital Outreach: Promoting the use of digital platforms is crucial to expand access to expert advice. A major initiative in this regard is the AquaBazaar platform, initiated by the National Fisheries Development Board (NFDB). AquaBazaar provides:
  • Virtual learning opportunities
  • Practical demonstrations for fishers
  • Clarification of key concepts related to fish breeding, seed production, and commercial fish farming.

Manmohan Singh, former Prime Minister and Finance Minister of India, passed away on December 26, 2023, at the age of 92. He will always be remembered for playing a pivotal role in saving India's economy during the 1991 economic crisis.

Brief background

• During the 1991 economic crisis, India was on the verge of a sovereign default (unable to pay off its debts), with extremely low foreign exchange reserves. The government even had to pledge its gold reserves to raise money.
• This crisis was caused by years of poor economic management, where the government was spending more than it earned, leading to high levels of debt.
• India's economy was also heavily controlled by the government through the License-Quota Raj, which restricted business growth and hindered private enterprise.
• In 1991, when Singh took over as Finance Minister in P.V. Narasimha Rao's government, he introduced a series of economic reforms that transformed India's economic landscape:
• Deregulation: Industries that were previously tightly controlled by the government were opened up for private sector participation.
• Trade liberalization: The government reduced import tariffs (taxes on imports) and removed restrictions on exports.
• Devaluation of the rupee: The Indian currency was made weaker to make Indian products cheaper abroad, boosting exports.

Key Achievements of the Reforms

• India’s Growth in the Global Economy: The 1991 reforms played a crucial role in increasing India's presence in the global economy.
  • According to World Bank data, India’s share in global GDP (the total economic output of the world) had been declining since the 1960s. However, after the reforms, India’s economic growth accelerated, and its share in global GDP began to rise. Today, India is on track to become the third-largest economy in the world.
• Poverty Reduction and Welfare Programs: Another major achievement of the reforms was a significant reduction in extreme poverty. As the economy grew, the government was able to generate more revenue, which it could then use to fund welfare programs aimed at helping the poor.
  • Although poverty is still a problem in India, especially in rural areas, the economic growth resulting from the reforms has helped lift millions out of extreme poverty. The reforms also created a cycle of wealth generation, which improved the government's ability to address poverty.
• Rise of Private Businesses and the Stock Market: The reforms helped unleash the power of private enterprise. By deregulating industries, businesses were no longer restricted by government controls, allowing them to grow, create jobs, and compete globally.
  • The stock market also grew rapidly after the reforms. In the early 1990s, companies like Infosys were able to list their shares on the stock market, which sparked the development of an equity culture in India.
• Increased Foreign Investment: Following the reforms, India became a more attractive destination for foreign investors. The liberalization of markets and the opening up of sectors to private businesses helped bring in foreign direct investment (FDI). This investment provided stability to India's economy, even as imports increased.
  • The inflow of foreign capital also helped stabilize the Indian rupee and supported the growth of India's stock market.

Challenges That Remain

• Manufacturing Sector Stagnation: Despite the impressive growth in sectors like services (IT, software, etc.), India has not been able to boost its manufacturing sector as much as other countries like China.
  • The share of manufacturing in India’s GDP has remained stagnant since the reforms. This has been a big concern because a strong manufacturing sector can create jobs for millions of people and lead to more inclusive growth.
  • Even though India missed the opportunity to become a major manufacturing hub, some states have done better than others in attracting manufacturing investments. Moving forward, India's policymakers need to focus more on building up the manufacturing sector to create more jobs and strengthen the economy.
• Inequality and Regional Disparities: While the economic reforms helped reduce extreme poverty, they did not equally benefit all parts of India. Inequalityremains a challenge, with some regions and states growing faster than others. The growth has been more visible in urban areas, while rural regions have seen slower development.
  • There is also concern about the growing gap between the rich and poor, as a large chunk of the wealth created by the reforms has been concentrated among a smaller group of people.

The 1991 economic reforms led by Manmohan Singh marked a turning point in India's history. The country went from being an economically closed nation with a struggling economy to an open, fast-growing economy that is now one of the world’s largest. Manmohan Singh’s legacy will always be tied to the economic transformation he helped bring about.

The UK House of Commons voted to legalize assisted dying, also known as assisted suicide, in England and Wales. This marks a significant step towards a more compassionate approach to end-of-life choices.

The Proposed Law:

• Key Provisions: The new Bill proposes to allow terminally ill adults who are mentally competent and have less than six months to live to seek assistance in ending their lives. The process involves:
  • Authorization: Any request must be approved by two doctors and a High Court judge.
  • Criteria: Only those with a terminal condition and the mental capacity to make such a decision would be eligible.
• Support for the Bill: Assisted dying offers a humane and compassionate option for terminally ill adults to end their suffering. It would allow people who are facing unbearable pain and have no hope of recovery to make a choice about how and when they die.
• Opposition to the Bill: This could lead vulnerable, severely disabled people to feel pressured into ending their lives to avoid burdening their families. There are also fears that the focus on assisted dying might undermine investments in hospice and palliative care.

Current Law in the UK:

• Assisted Suicide: Suicide itself is not a criminal offense in England and Wales.
• However, under the 1961 Suicide Act, assisting someone to commit suicide is a criminal act, and those found guilty could face up to 14 years in prison. The law currently makes it illegal to help anyone, even a terminally ill person, to end their life.

Status in Other Countries:

• Many countries have taken different approaches to assisted dying or euthanasia:
  • Switzerland: The first country to legalize assisted dying in 1942.
  • USA: States like Oregon passed the Death with Dignity Act in 1997, allowing mentally sound adults with terminal illness to end their lives with self-administered drugs.
  • Canada: Since 2016, Canada's Medical Assistance in Dying (MAID) law allows both terminal and non-terminal patients (if the condition is grievous or irremediable) to seek help in ending their lives.
  • Netherlands and Belgium: Both countries have comprehensive euthanasia laws, with Belgium extending euthanasia to minors with parental consent.
  • Spain and Germany: These countries have passed laws, but their implementation is at various stages.
  • France and Ireland: These countries are still deliberating on assisted dying legislation.

Position in India:

• Right to Die with Dignity: In 2018, India’s Supreme Court ruled that the right to die with dignity is part of the right to life under Article 21 of the Indian Constitution.
  • The Court legalized passive euthanasia, allowing the withdrawal of life support from terminally ill patients or those in a permanent vegetative state. This allows people to die naturally without prolonged medical intervention.
  • In 2019, the guidelines for passive euthanasia were simplified to address practical concerns. These included:
    • Living wills for terminal patients to choose whether to withdraw medical treatment.
    • Strict timelines and reduced bureaucratic hurdles for judicial approval.
  • In 2023, new guidelines were issued to help doctors navigate the withdrawal of medical support in a compassionate and regulated

Indigenous Protected Areas (IPAs) are a critical part of global environmental conservation and cultural preservation.

What are Indigenous Protected Areas (IPAs)?

• IPAs are areas where Indigenous peoples commit to conserving the environment through their traditional knowledge and practices.
• These areas can include forests, deserts, rivers, and even marine ecosystems.
  • The concept of IPAs emerged in the 1990s, particularly in Australia, where the first IPA was established in 1998.
• IPAs are recognized by national governments and often form part of a larger conservation network, contributing significantly to the protection of biodiversity and ecosystems.
• Global Distribution of IPAs: As of 2023, there are more than 3,000 IPAs worldwide, covering approximately 8.8 million square kilometers. This represents about 6% of the planet’s terrestrial protected areas. The distribution of IPAs varies significantly across the globe, with large concentrations found in Australia, Canada, Brazil, and the United States.
  • Australia: With 78 declared IPAs, Australia has the largest network, covering over 74 million hectares, nearly 50% of the country’s National Reserve System.
  • Canada: Over 20 IPAs are located primarily in northern territories, spanning around 35 million hectares.
  • Brazil: Known as Indigenous Lands (Terras Indígenas), Brazil’s IPAs cover an area of 117 million hectares, making up 14% of the country’s total land area.
  • United States: The U.S. has numerous IPAs, particularly in Alaska, managed by tribal nations and Indigenous organizations.
• Biodiversity: According to the World Wildlife Fund (WWF), IPAs are home to:
  • 25% of the world’s biodiversity hotspots.
  • 40% of the remaining tropical and subtropical forests.
  • 50% of the world’s freshwater resources.

An extreme marine heatwave linked to climate change devastated Alaska’s common murre (Uria aalge) population, wiping out nearly four million seabirds — about half of their global numbers — over a three-year period.

About

• Common murres are long-lived diving seabirds that inhabit temperate and subarctic marine ecosystems in the Northern Hemisphere.
• They feed on small schooling fish, juvenile predatory fish and krill, diving as deep as 200 metres to forage.
• Common Murres are dapper, black-and-white seabirds that nest in raucous throngs on crowded sea cliffs.
• Often described as "flying penguins," they have a tuxedoed look but are actually relatives of auks and puffins.
• Habitat: It has a circumpolar distribution, occurring in low-Arctic and boreal waters in the North Atlantic and North Pacific. It spends most of its time at sea, only coming to land to breed on rocky cliff shores or islands.

The Real Effective Exchange Rate (REER) of the rupee increased to 108.14 in November from 107.20 in October, appreciating by 0.9 per cent.

About Real Effective Exchange Rate (REER)

• REER represents the inflation-adjusted, trade-weighted average value of a currency against its trading partners and it is often used as an indicator of external competitiveness.
• The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies.
• The weights are determined by comparing the relative trade balance of a country's currency against that of each country in the index.
• An increase in a nation's REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper, reducing its trade competitiveness.

Dr. Manmohan Singh, former Prime Minister and architect of India's economic reforms, passed away at the age of 92 on December 26, 2024. He is remembered for his role in shaping modern India's economic landscape, especially his contributions as Finance Minister in 1991, when India faced an economic crisis. His legacy as a statesman who balanced economic reforms with political pragmatism continues to shape discussions on governance, policy-making, and leadership in India.

Manmohan Singh's Legacy as an Economist

• Visionary Reforms: Singh's liberalization policies in the early 1990s, implemented with Prime Minister Narasimha Rao, transformed India's economy, transitioning the country from a near-sovereign default to a growing market economy.
• Collaborative Leadership: His ability to attract top economists like Montek Ahluwalia and C. Rangarajan, and his understated leadership style helped in formulating sound economic policies despite the political challenges of coalition governance.
• Reforms and Growth: The economic reforms of the 1990s, particularly in liberalizing trade, finance, and industry, set the stage for India’s decades-long economic growth, lifting millions out of poverty and integrating India into the global economy.

Administrative and Political Contributions

• Key Legislation: Singh’s government enacted landmark policies like the National Food Security Act and the National Rural Employment Guarantee Act, aimed at alleviating poverty in marginalized sectors of society.
• Strengthening Institutions: The Right to Information Act, a hallmark of transparency, was passed under his leadership, marking a significant step toward accountable governance.
• Foreign Relations and Strategic Vision: His leadership strengthened Indo-US relations, culminating in the 2008 Civil Nuclear Deal, and he played a key role in India’s integration into the global political and economic systems.

Leadership Style and Integrity

• Curiosity and Humility: Singh's ability to listen attentively to others, even during meetings with his economic advisors, demonstrated his humility and interest in diverse perspectives, making him a collaborative leader.
• Handling Criticism: Even in the face of criticism, such as during the 2012 panel discussion, Dr. Singh responded with calm reflection, displaying emotional maturity and a willingness to learn from critiques.
• Personal Integrity: Known for his personal honesty and commitment to public service, Dr. Singh maintained his integrity throughout his career, with no allegations of corruption ever touching him, even during times of political scandal.

Practice Question:

Q. Assess the leadership qualities and policy contributions of Dr. Manmohan Singh, particularly focusing on his economic reforms in the 1990s, his handling of political challenges, and his legacy in institutional development and governance.

The Indian economy is witnessing the growing issue of economic inequality in India and the need for progressive fiscal policies, specifically focusing on the taxation of ultra-high-net-worth individuals (UHNWIs). The discussion emphasizes the necessity of increasing public spending to meet essential social and economic needs while addressing the concentration of wealth among the super-rich. It draws attention to the feasibility of taxing the wealthiest individuals more fairly, pointing to international models and calls for global cooperation in wealth taxation.

Need for Increased Public Spending

• Deficit in Essential Services: Despite strong aggregate income growth, a large portion of India's population continues to lack access to basic necessities such as food, healthcare, education, and housing, underscoring the gap in public spending.
• Climate Change Adaptation: India’s public investments in climate change adaptation and the green transition remain insufficient, leaving vulnerable populations at risk of natural disasters and environmental degradation.
• Inequality and Economic Stagnation: Rising income and asset inequality in India, where the top 10% benefit disproportionately from economic gains, has led to stagnation in mass consumption demand, hindering overall economic growth.

Inefficiency of India’s Tax System

• Low Tax-to-GDP Ratio: India's tax-to-GDP ratio is significantly lower compared to other middle-income countries and G20 nations, limiting the government’s capacity to increase public spending on essential services.
• Regressive Tax Structure: India’s tax system is regressive, with indirect taxes disproportionately affecting the poor and middle classes, while the rich continue to benefit from lower tax burdens.
• Need for Progressive Fiscal Policy: A more progressive fiscal policy, with higher taxation of the super-rich, is crucial to mobilize resources for social welfare and infrastructure development.

Proposal for Taxing the Super-Rich

• Global Calls for Wealth Tax: There is growing international consensus on taxing ultra-high-net-worth individuals (UHNWIs) fairly, as evidenced by the G20 Summit and reports by economists like Gabriel Zucman advocating for a global minimum wealth tax.
• Feasibility of Wealth Tax in India: Contrary to earlier arguments that wealth tax is unfeasible, digitization of financial records and better tracking of real estate assets have made it increasingly possible to implement such taxes effectively in India.
• Addressing Wealth Evasion: Implementing a wealth tax on the super-rich, in combination with global tax cooperation, would help curb tax avoidance by UHNWIs, ensuring they contribute fairly to the country’s economic needs.

Practice Question:

Q. Critically analyze the need for progressive taxation in India, focusing on the potential benefits and challenges of taxing ultra-high-net-worth individuals. Discuss the feasibility of implementing such a tax system in the context of India’s current fiscal and economic conditions.

The Goods and Services Tax (GST) Council, in its 55th meeting, made a series of decisions on indirect tax matters, including rate changes and clarifications, amid growing concerns over the delay in addressing long-pending issues. Notably, the Council's inaction on simplifying the GST structure and its failure to implement timely recommendations on insurance policies and other sector-specific issues has raised doubts about the system's future effectiveness. The delay is particularly concerning as it could negatively affect consumer demand and investment in key sectors like insurance and real estate.

Delay in Key Clarifications

• GST Council's Inaction: The GST Council’s recent meeting saw delays in addressing fundamental issues, including clarifying that pepper, raisins, and certain banking penalties are not taxable, which should have been resolved much earlier in the regime.
• Complex GST Rates: The Council’s indecision on a simpler, more rational GST structure has left many sectors, including insurance and real estate, in uncertainty, hampering economic stability and growth.
• Failure to Meet Expectations: Despite early promises of a ‘Good and Simple Tax’, the ongoing complexity in GST rates continues to undermine its original purpose, with the much-awaited rationalisation process yet to be executed.

Impact on Industry and Consumption

• Inaction on Insurance Taxation: The delay in addressing recommendations related to the taxation of life and health insurance policies is hurting the industry, with new insurance business seeing a significant decline in anticipation of a tax cut.
• Private Investment Impact: The prolonged indecision on GST rationalisation is exacerbating uncertainty around tax policies, dampening private investment, which depends on consumption growth and tax clarity.
• Stagnant Consumer Demand: The longer the delay on GST reforms, the greater the negative impact on already sluggish consumer demand, further hindering the recovery of key sectors like insurance and real estate.

Setbacks to the Real Estate Sector

• Real Estate Taxation Issues: The reversal of the Supreme Court’s October verdict on input tax credits for construction costs of commercial properties intended for leasing will create additional challenges for the real estate sector, affecting investor confidence.
• Retrospective Changes: The decision to make the legal changes on input tax credits retroactive to July 2017 raises concerns among investors, reminiscent of past issues with taxation in India, making the country’s investment climate more volatile.
• Investor Sentiment: The reversal of the ruling is expected to further shake investor confidence, contributing to the hesitance in the real estate market and discouraging new investments.

Practice Question:

Q. Critically examine the challenges facing India’s Goods and Services Tax (GST) regime, focusing on the delayed rationalisation of tax rates, the impact on key sectors like insurance and real estate, and the implications for investment climate and consumer demand.