6 August 2020: The Indian Express Editorial Analysis
1) With MGNREGA’s help-
GS 2- Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes
- The MGNREGA has created 153.16 crore person-days of employment during April-July.
- Not only is this way higher than the 107.24 person-days for the corresponding four months of last fiscal, but also significant compared to the 267.96 crore and 265.35 crore person-days generated in the whole of 2018-19 and 2019-20, respectively.
- Moreover, it is necessary to note that April was a washout month.
SURGE IN DEMAND:
- With the focus of administrations then on enforcing the lockdown, the 11.93 crore person-days of employment was less than half of that during the same month last year.
- The real ramp-up(increase) happened in May (50.88 crore person-days) and June (61.44 crore, an all-time-high), before falling to 28.91 crore in July.
- In short, MGNREGA has done what it is expected to do even in normal times: Provide work in rural areas during the peak summer months when the rabi crop would already have been harvested and kharif plantings are still to gather pace.
- The current times have, of course, been far from normal. MGNREGA is intended primarily as an employment scheme for unskilled rural manual workers.
- This time round, though, it was supposed to also cater to migrant labourers returning to their villages. While there are reports of even engineers and graduates enrolling for work, it’s clear how widespread this phenomenon is.
- Also, MGNREGA guarantees only 100 days of work to all adult members of a rural household at wage rates ranging from as low as Rs 190 in Chhattisgarh to Rs 309 in Haryana.
- Clearly, it cannot substitute for what the returning migrant labourers were earning as drivers, electricians, plumbers, masons and carpenters or even as less-skilled security guards and loaders in factories. It translates into temporary relief at best.
DOING THE RIGHT THING:
- Overall, the government has done the right thing by stepping up allocations both for MGNREGA and PDS grains.
- But in the end, MGNREGA cannot be any more than a scheme that provides employment during the agricultural lean season for landless labourers and marginal cultivators.
- Now, the focus has to be on getting people, including the migrant labourers, back to normal work.
MNREGA has helped mitigate(decrease) increased rural distress due to Covid. Now, focus on getting people back to normal work.
2) The new cool-
- In a country of billions, what has emerged out of the recent health conundrum(problem) is the need to be “atmanirbhar”, an emotion that surpasses the human need for acquisitions.
- Thus, the rise of the “Made in India” sentiment, which has captured both the hearts and minds of conscious millennials.
REVIVING THE INDUSTRY:
- Not surprising then that handlooms are the flavour of the season. After all, the sector employs almost 3.5 million people with each region paying homage to its innate culture through the fabric of freedom.
- The movement has been gaining popularity over many years, but a noticeable momentum began four years ago, when the Minister of Textiles Smriti Irani’s #iwearhandloom became a sensation on Twitter, where handspun was celebrated with pride.
- This renewed the pledge to both support and resuscitate(revive) the industry.
- The results were both ingenious and innovative, with not just design interventions with the help of leading style gurus, but also a government grant to the textile ministry for providing financial assistance to languishing weavers.
- The key is in establishing a direct connection between retailers and weavers to eliminate the middleman, urging e-commerce giants to pitch in.
- The textile industry is dominated by women — they constitute almost 72 per cent of it — and the textile minister has offered various schemes like the National Handloom Development Programme to empower them.
NEED FOR FOREIGN INVESTMENT:
- Interestingly, Prime Minister, besides being an avid supporter of textiles, has reiterated the need for foreign investment to create employment as well as skill development.
- Almost 30 million farmers are a part of producing 60 per cent natural fibres in India, which is the need of the hour to help boost the economy. Most importantly, sustainability is setting the new world order.
- India’s population, of which 50 per cent is below 25, and more than 65 per cent is below 35, has embraced this message.
- Whether it is schools or colleges, handlooms have succeeded in marking their presence in youngsters’ wardrobes.
- The fact that designers who have adopted clusters for Ikkat, Chanderi, Maheshwari among others, or even the rise of Banaras as a hotspot, is a sign of the popularity of going eco-friendly.
- What has further generated interest is the National Crafts Museum and Hastkala Academy, Pragati Maidan, which showcase short-term courses for the discerning few who would like to equip themselves with knowledge about handloom/craft and Indian textile traditions.
- As we grasp with new realities, the education sector has made strides in incorporating this aesthetic in their curriculum by taking fashion students on trips to clusters.
- This has opened a plethora(series) of opportunities for them. As they enter the real world, they stitch together endearing stories of Indian crafts through their design prowess.
- The Fashion Design Council of India has taken many steps to support handlooms.
- They initiated on Instagram a series titled “Celebrating the Maker” last month where designers paid homage to handloom weavers that they have been associated with.
- Another major thrust has been witnessed at the India Fashion Week where handlooms have been given a place of pride and for many years along with Ministry of Textiles, many programmes with designers and clusters have been initiated.
- On handloom day, the FDCI board has decided that it will allocate from the COVID trust fund an amount to buy unsold stocks from weavers.
- The weavers will be identified by the DC handlooms, under the Ministry of Textiles, as well as the handloom designers.
With government support and growing awareness, handlooms have captured the hearts and minds of conscious millennials.
3) A global solution for the digital world-
- The process to reform international tax rules, that began in 2012, arose primarily because under the existing corporate tax system, traditional businesses were taxed on conventional principles.
- However, digital companies paid low taxes by locating their intellectual property in low tax jurisdictions and more so by having minimal or no taxable presence in the market.
- Therefore, their profits are not commensurate(in proportion) to their revenues in markets such as India.
OECD: The Organisation for Economic Co-operation and Development is an intergovernmental economic organisation with 37 member countries, founded in 1961 to stimulate economic progress and world trade.
- In trying to find a solution agreeable to all, multilateral relations have been tested repeatedly. To begin with, conflicting proposals were made by countries.
- Some suggested that existing rules were enough and could be updated to appropriately tax profits of digital companies.
- Others, including India, stressed that a new basis to establish the taxable presence of these remotely operable companies is necessary.
- Nevertheless, the inescapable trade-off between consensus and tax sovereignty remained.
- To strike a balance, the OECD weaved various proposals by the US, the UK and India into a unified approach.
- Even though the proposal sought to implement a simplified approach, it was fraught with a series of practical complexities.
- The most crucial among these being identifying a non-routine profit from a routine profit.
- To add to this, the process of implementation would itself require a significant departure from the existing dispute resolution mechanisms.
- The OECD assured market jurisdictions that down the line, international tax rules will be re-examined and reformed so that tax is paid duly in countries that are the source of such incomes.
- However, as the timelines for the finalisation of the programme drew closer, chances of an agreeable outcome seemed bleak(weak).
- Heightening apprehensions of an impasse(problem), the US announced, in February 2020, that it would implement a unified approach on a safe harbour basis.
- The desire for such exclusion would render the agreement meaningless considering that most big technology companies are residents of the US.
- The OECD’s estimates were no more encouraging — the proposal, if implemented, would bring 1- 2 per cent of current corporate tax revenues.
CONSENSUS BASED SOLUTION:
- Thereafter, with the outbreak of the coronavirus pandemic and the consequent slump in economic activity, governments turned their attention to domestic issues.
- To find an interim fix, countries began implementing digital services tax (DST) on gross revenues from online advertising and e-commerce sales.
- India expanded the scope of equalisation levy in March 2020, earlier applicable only to online advertising, to the sale of goods and services by e-commerce operators.
- Others, such as Indonesia, introduced the electronic transaction tax and the UK passed the digital services tax.
- Further, the US’s vacillation over the proposal in June was no assurance of an imminent(immediate) global solution.
- The US Treasury Secretary expressed that the US was inclined to pause the digital tax talks.
- Shortly after, as other countries remained committed to proceed, the US clarified that a consensus based solution was ideal and it would participate in the July talks.
USTR: The Office of the United States Trade Representative (USTR) is the United States government agency responsible for developing and recommending United States trade policy to the president of the United States, conducting trade negotiations at bilateral and multilateral levels, and coordinating trade policy within the government through the interagency Trade Policy Staff Committee (TPSC) and Trade Policy Review Group (TPRG).
- In the meantime to stall the proliferation(increase) of digital taxes, USTR investigations, under Section 301 of Trade Act 1974, have also been launched against 10 countries, including India.
- The investigation will examine if the tax is unfair, unreasonable and unequitable. Consequently, retaliatory tariffs may be imposed to recover the costs of such taxes.
- The USTR investigations have a long history and are ironically unilaterally initiated.
- It also isn’t the first time that the US and the EU have attempted to settle their disagreement on tax matters by invoking WTO rules.
- In 2017, the US’s sweeping “reform” of the tax system included a foreign deduction of intangible incomes — a provision that the EU described as an export subsidy to US corporations by allowing export linked tax deductions.
- Nevertheless, investigations are underway and a group of companies in the Silicon Valley have made their submission characterising DSTs as discriminatory and a form of leverage to nudge the US to negotiate.
- On the contrary, India has clarified that the lower thresholds for the application of the tax would apply more widely to companies of many jurisdictions and is entirely consistent with India’s position under the WTO.
- Since it was implemented on April 1 2020, it has not been retrospectively applied and India remains committed to the multilateral process.
- The threat of the imposition of tariffs comes at a time when there is an unprecedented slowdown in global trade.
- The imposition of tariffs must therefore be weighed against their costs to the domestic economy.
- Despite the recent developments, the G20 remains committed to the process. OECD has set itself an ambitious target and announced that it will deliver the blueprints of design by October this year.
- While some allude to a consensus, it is amply clear that the hopes from the process are varied.
- To avoid the mutual costs from trade wars, perhaps efforts to modify DSTs into a simpler withholding tax may pave the way for desired reform.
- A multilateral approach is needed to resolve concerns over digital taxes.