MALUKA IAS
FACTLY
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Date: 14th November
Sr. No. Topics Points to remember Why in news…???
1. Cooperative Federalism
  • In S.R. Bommai v. Union of India (1994) – The limitation laid down by the Supreme Court might have placed gentle breaks on exercise of this power, but the Centre continues to wield superior legislative powers, including residuary powers and legislative precedence.
  • Articles 270(1A) and 270(2) provide that taxes levied under the GST laws will be shared in the manner ‘prescribed’ in Article 270(2) — which takes us to the FC, and not the GST Council.
  • The possible anomaly between roles and powers of the FC and the GST Council has not been tested but it may make sharing of these revenues subject matter of the FC and Parliament rather than the GST Council, where States have more power.
There is debate on cooperative federalism because of GST.
2. Economic Capital
  • The concept of economic capital has gained significance especially after the global financial crisis in 2008. The crisis exposed many central banks in the world to multiple risks, which forced many of them — US Federal Reserve, Bank of England and European Central Bank — besides sovereign governments to pump in liquidity, buy securities and expand their balance sheets to boost confidence in the financial system and to ensure that critical institutions did not collapse.
  • Central banks do make money thanks to seigniorage, or the profits earned by issuing currency which is passed on to the owner of the central bank, the government. But they are typically conservative and the crisis prompted a review of the capital buffers that central banks and commercial banks needed. Essentially, the economic capital framework reflects the capital that an institution requires or needs to hold as a counter against unforeseen risks or events or losses in the future.
  • The Bank of England’s capital will be capped by a ceiling above which all net profits are transferred to the treasury as dividend. It also ensures that there is a floor below which a rapid recap to the target is triggered.
There is also the fact that in India, the government that owns a large number of banks is itself struggling to recapitalise these banks, given the fiscal strain and the need to meet fiscal targets and to spend adequately on infrastructure and on social welfare schemes.
3. Ease of Doing Agri-business
  • States may soon start receiving extra funding for the Agriculture Ministry’s flagship schemes on the basis of their performance in encouraging agri-business, especially with regard to marketing, land and governance reforms.
  • The proposed index has a wider ambit, but the focus is still on reforms, with marketing reforms (25%) and governance and land reforms (20%) carrying almost half of the weight of the parameters in its scoring system.
The Centre expects to roll out a new Ease of Doing Agri-Business Index early next year, which will rank the States on the basis of such reforms, as well as their investment in agriculture, increased productivity, reduction of input costs, and risk mitigation measures.