Yojana February 2017 Part 1 Summary For UPSC Civil Services

1. Demonetization :- Review of the Past Events After 8th November 2016:

On 8th November Prime Minister Announced that Rs.500 and Rs.1000 Notes will not be a legal Tender from immediate effect.

Important Fact : Nearly 86% of the Country's Currency which constituted 12.2 % of the GDP was there in the Form of Rs. 500 and Rs.1000 Notes.

Steps against black money:

 The prime minister had proposed to the G-20 at Brisbane that international cooperation in

sharing information with regard to base erosion and profit sharing should be expedited.

Important Note:-Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax Countries(Tax-Havens). 

So To Prevent That OECD has came out with a Package of Measures under BEPS.

 The agreement with Switzerland with effect from 2019, details of assets held by Indian

citizens in Switzerland and vice-versa would be provided to each other.

 Since 1996, the Double Taxation Avoidance Treaty with Mauritius was being renegotiated.

Similar treaties with Cyprus and Singapore been renegotiated.

 The Income Declaration Scheme (IDS) 2016 was highly successful with a 45 per cent tax.

 The PAN card requirement for cash transactions beyond rupees two lakhs put hurdles on

expenditure through black money.

 The Benami law was legislated in 1988 and never been implemented.

 The GST, which is scheduled to be implemented this year, will provide for better indirect tax

administration and will be a more efficient law will check tax evasion.

Short-term costs or short-term macroeconomic impacts due to demonetization:

 inconvenience and hardship especially those in the informal and cash-intensive sectors

of the economy who have lost income and employment.

 There have been reports of job losses, declines in farm incomes, and social disruption,

especially in the informal, cash-intensive parts of the economy

 The benefits of lower interest rates and dampened price pressure may have cushioned

the short-term macroeconomic impact.

Long-term potential of demonetization:-

 Greater digitalization of the economy

 increased flows of financial savings

 greater formalization of the economy

 All of which could eventually lead to higher GDP growth, better tax compliance and

greater tax revenues.

 Demonetization has been a redistributive device to transfer illicit wealth from the rich to

the rest, via the government.

 misuse of cash has led to artificial increase in the cost of goods and services like houses,

land, higher education, health care and so on.

 Lucky Grahak Yojna (for consumers) and Digi-Dhan Vyapar Yojna (for merchants) –

promotion of digital payment methods to encourage consumers and merchants to

increasingly shift to these payment modes. 

The Schemes will be implemented by National Payments Corporation of India. 

Transactions eligible for this scheme should take place through RuPay cards, Unstructured Supplementary Services Data, Unified Payments Interface and Aadhar Enabled Payment System.

2. FROM A CASH ECONOMY TO A LESS-CASH ECONOMY:-

Introduction:-

 The currency notes of two denominations Rs. 500 and Rs. 1000 had accounted for more

than 85 percent of the total value of banknotes in circulation. We can start with a less-cash

society and then cashless society will not be a far-off destination.

 First in 2014, the government launched the Jan Dhan Yojna which also sow the seeds of a

cashless economy.

 The best way to reduce corruption and black money in the economy is to move from an

economy dependent predominantly on cash to electronic transfers.

 It means a revolution from the fiat money to digital money to curb the flow of black money

and increasing transparency of the flow of cash. Internet banking and the recently launched

Unified Payment Interface along with the e-wallets are widely used.

Advantages of a Cashless Economy:-

Digital Transactions are More Transparent.

Digital Payments are Easy to Track.

The Origin of Cash Can not be Traced, which can be traced for Digital Payments.

Crimes can be traced and tracked.

Reduction of Cost of Printing the Notes.

Steps towards a Cashless Society:-

1) Vittiya Saksharta abhiyan : To make people aware about the Digital Payments and thus reduce the digital divide.

2)Lucky Grahak and Digidhan Vyapar 

3)Bharat Interface for Money (BHIM)

4)Rupay Cards and Aadhar Enabled Payments.

Learn From Sweden :-

First Country in the world that has taken the resolve to be cashless by 2020.

According to the central bank (the Riksbank), cash transactions made up barely 2% of the

value of payments made in Sweden in 2016, and the figure is expected to drop to 0.5% by

2020.

Technology plays an important role when we talk about the policy shift from cash to cashless.

Swish (a mobile app) allows users to make real-time transactions from anywhere.

Challenges :-

i)Digital Illiteracy

ii)Slow Internet Speed in India

iii)Cyber Security

iv)Infrastructural Challenges

v)Electricity Challenges

vi)Corruption.

vii)Prevalence of MSME and Unorganized sector in India and thus prevalence of cash.

Conclusion:-

What can be concluded from all this is that becoming a 100% cashless Society is not at all Possible right now. It will be a Slow Process.

The Process can be given a Push now by spreading awareness and by reducing the digital divide and expanding the IT Infrastructure.

3)DEMONITISATION – IMPACTING ELECTIONS:- 

Elections in India have always been dominated by the Money and Muscle Power.

State Funding Of Polls:

What is state or public funding of elections?

This means that government gives funds to political parties or candidates for contesting elections. 

Its main purpose is to make it unnecessary for contestants to take money from powerful moneyed interests so that they can remain clean. For this to happen, state funding needs to be accompanied by strict accounting and transparency. 

Q. What is the status in India?

While the political parties, on Commission and various bod Election Commission and various bodies remain committed to state funding of elections, there has been little progress on this. Current state funding measures include provision of free time on public broadcasters for national parties in general elections and for registered state parties in state legislature elections. 

Besides this, national parties are provided some benefits like security, office space, utility subsidies etc. Another form of indirect state funding available in India is that registered political parties do not have to pay income tax, as laid down in S.13A of the Income Tax Act.

 The Indrajit Gupta Committee on this subject was set up in 1999. The committee suggested

only partial state funding of elections and that too with a condition that there must be genuine

inner party democracy – which no party is willing to consider.

Two challenges are great – abuse of money and voter apathy.

Impact of demonetization on Elections:-

 It is believed that this move would have a big impact on the ongoing polls in five states, as

this is the time that black money is in distribution pipeline.

 Earlier, disbursal of money to various areas used to take place closer to the date of polling.

However, after the ECI drive of cracking down, political parties moved up the disbursal date.

 That is why announcement of demonetization few weeks before the elections hit the money

distribution plans ate the right time.

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