UPSC Archives - Management Notes

“Though the export promotion strategy has resulted in the diversification of India’s exports basket, yet it has failed to decrease the trade deficit.” Comment.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

“Though the export promotion strategy has resulted in the diversification of India’s exports basket, yet it has failed to decrease the trade deficit.” Comment.

According to the statement, India’s export promotion strategy has resulted in a wide range of goods being exported from the country over the last few years, but has not been successful in reducing its trade deficit as a result. Let’s take a closer look at this statement to better understand it:

Export Promotion Strategy:

In order to boost the country’s exports, India has been pursuing an export promotion strategy for many years, which involves various policies and measures. Generally, the government’s goal is to make Indian goods and services more competitive in international markets through a number of measures, such as tax benefits, subsidies, and easier access to credit.

These measures often include incentives such as tax benefits, subsidies, and easier access to credit for exporters.

Diversification of Export Basket:

India has been able to diversify its export basket in response to this export promotion strategy as one positive outcome. This means that India is exporting a broader range of products and services to various countries. Previously, India’s exports were heavily dependent on a few sectors such as information technology and textiles. As a rule, diversification can be seen as a positive development as it reduces the risks of overreliance on one market or sector.

Trade Deficit:

Trade deficits occur when a country’s imports (goods and services purchased from other countries) outweigh the amount of goods and services sold to other countries (goods and services sold to other countries). A trade deficit has consistently been experienced by India, meaning that the country imports more goods and services than it exports. In addition to draining the country’s foreign exchange reserves, it can also lead to a dependency on external finance.

Now, let’s explore why the export promotion strategy has failed to decrease the trade deficit:

1. Import Dependency:

In India, there is a growing middle class and a growing economy, which in turn increases the demand for a wide range of products, including those that cannot easily be substituted with domestically produced alternatives. Therefore, India continues to import large quantities of goods like electronics, machinery, oil, and chemicals, which offset the gains that the country has made through export diversification.

2. Global Economic Factors:

The trade deficit is not solely determined by India’s export efforts but also by global economic conditions. There are a number of factors that can affect the trade balance, such as fluctuations in global commodity prices, changes in exchange rates, and economic conditions in key trading partners.

3. Structural Issues:

This is mainly due to the fact that there are structural issues that affect the competitiveness of Indian exports. These include bureaucratic red tape, infrastructure deficiencies, and regulatory hurdles, all of which can seriously hinder the ability of Indian companies to compete effectively in international markets.

4. Limited Success in High-Value Exports:

In spite of the fact that India has diversified its export basket over the last few years, it has not been successful in exporting goods and services that have a high value-added, and many of its exports still fall into lower value-added sectors, which limits the revenue it receives from exports.

5. Persistent Trade Barriers:

India may find that trade barriers, including tariffs and non-tariff barriers, imposed by other countries, can hinder its efforts to increase exports, as they can restrict access to international markets for Indian goods.

As a result, India has successfully diversified its export basket through its export promotion strategy, but several factors have kept it from reducing its trade deficit effectively. It is imperative that we address the trade deficit in a multifaceted manner, which means addressing structural issues, promoting innovation and higher value-added exports, while fostering an environment conducive to global trade.

There is no doubt that trade deficits are influenced by a complex interplay of domestic and international factors. It’s also important to realize that reducing trade deficits requires a sustained effort over a long period of time.

Enumerate economic and social infrastructure programmes launched after 2015 towards restructuring the rural economy and reduction in poverty.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Enumerate economic and social infrastructure programmes launched after 2015 towards restructuring the rural economy and reduction in poverty.

Here are some key initiatives and programs:

Pradhan Mantri Awas Yojana (PMAY) – Rural (2016):

In India, the PMAY program is a flagship affordable housing program. As part of PMAY-Rural, the Indian government provides financial assistance to rural households to construct new homes or renovate existing ones. As part of this program, access to basic housing infrastructure will be ensured to improve living conditions and reduce poverty.

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY):

With the launch of DDU-GKY in 2014, the goal of the program is to provide rural youth with marketable skills to improve their employability, thereby enhancing their employability. The objective of this program is to reduce poverty and promote economic empowerment in rural areas by imparting skills and connecting them with employment opportunities.

National Rural Livelihood Mission (NRLM):

This organization was established in 2011 but has been growing and restructuring significantly since 2015. It aims to organize rural poor into self-help groups (SHGs) and provide them with financial and social resources. Its purpose is to promote micro-enterprises and entrepreneurship in rural areas in order to create sustainable livelihoods and reduce poverty.

Pradhan Mantri Gram Sadak Yojana (PMGSY):

This project was launched in 2000 but has continued with renewed focus after 2015 in order to provide rural areas with all-weather road connectivity. As a result of improved road infrastructure, rural regions can be able to gain access to markets, healthcare, and education, leading to economic growth and reduction of poverty.

National Rural Employment Guarantee Act (NREGA):

As part of the National Rural Employment Guarantee Program (NREGA) launched in 2005, every rural household that has an adult member participating in unskilled manual labor is guaranteed 100 days of wage employment in a financial year. Despite the fact that it predates 2015, it continues to be an important program for rural employment and poverty reduction.

Digital India:

Founded in 2015, the Digital India program seeks to transform India into a knowledge-based economy and a digitally empowered society. In addition to improving digital infrastructure in rural areas, it also includes projects like the BharatNet project, which aims to provide broadband connectivity in all villages in the country.

Digital infrastructure can enhance economic opportunities and reduce poverty by providing access to e-commerce, online education, and digital financial services.

Swachh Bharat Mission – Gramin (SBM-G):

In 2014, this sanitation program was initiated with the aim of ensuring that rural areas remain clean and open defecation-free (ODF) by building toilets and promoting good sanitation practices. By reducing healthcare expenses, improved sanitation infrastructure can contribute to the reduction of poverty by resulting in better health outcomes and reducing healthcare expenses.

Pradhan Mantri Fasal Bima Yojana (PMFBY):

In 2016, this policy was introduced to help farmers mitigate the financial risks associated with farming and support rural livelihoods in the event of crop loss due to natural calamities. It provides financial assistance to farmers in the event of crop loss due to natural calamities.

National Social Assistance Programme (NSAP):

This program helps vulnerable populations by providing basic social safety nets to elderly, disabled, widowed, and other vulnerable people who live in rural areas. Although it was not launched after 2015, it still provides financial assistance to individuals in rural areas who are elderly, disabled, and widowed.

Ultimately, these programs will contribute to the reduction of poverty and the development of rural economies through the enhancement of rural infrastructure, the creation of livelihood opportunities, and the improvement of living conditions in rural areas.

For the most up to date details on these initiatives, I recommend checking the latest information from official government sources, as names, objectives, and details may have changed since my last update.

Critically examine the causes and consequences of different types of migratory flows on the home and destination economies.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Critically examine the causes and consequences of different types of migratory flows on the home and destination economies.

This is a complex and multifaceted phenomenon with a variety of causes and consequences for both the home and destination economies of migrants. There are three kinds of migratory flows: international migration, internal migration, and rural-to-urban migration.

Let us critically analyze what causes and consequences each of these types have on their respective economies.

1. International Migration:

Causes:

a. Economic Disparities:

People from low-income countries or countries that are economically struggling frequently migrate to wealthier nations in search of better employment opportunities and a higher standard of living. Economic disparities between countries are one of the primary factors driving international migration.

b. Conflict and Persecution:

It is common for many refugees and immigrants to flee their countries because of political instability, conflict, or persecution that they face in their homeland.

c. Family Reunification:

There is also the possibility of family members who have already immigrated from other parts of the world being a significant motivation for international migration as well.

“India’s decision of not joining Regional Comprehensive Economic Partnership (RCEP) is based on sound economic reasoning and is not a diplomatic strategy.” Discuss.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

“India’s decision of not joining Regional Comprehensive Economic Partnership (RCEP) is based on sound economic reasoning and is not a diplomatic strategy.” Discuss.

India’s decision not to join the Regional Comprehensive Economic Partnership (RCEP) is indeed grounded in sound economic reasoning rather than being solely a diplomatic strategy. Several factors contribute to this decision, and it’s important to delve into each of them to understand why India chose to stay out of this significant regional trade agreement.

Trade Imbalances:

The existing trade imbalances between India and many RCEP members, especially China, were one of India’s primary concerns. The Indian government was concerned that Chinese goods would flood the country’s markets in the near future, which would lead to a further trade deficit. This deficit would negatively impact domestic industries and employment opportunities.

Agriculture Sector:

In the case of India, which has a large agricultural sector, it was concerned about the impacts of the regional comprehensive economic partnership (RCEP) on its farmers. The fear was that cheaper agricultural products from RCEP member countries would flood the Indian market, harming the livelihoods of Indian farmers.

Manufacturing and Industry:

RCEP could have increased competition from more efficient manufacturing countries, potentially harmful to the growth of domestic industries in India, as the country has been striving to boost its manufacturing sector through initiatives like “Make in India.” Joining RCEP could have harmed the growth of domestic industries in India.

Intellectual Property Concerns:

There were also concerns raised by India regarding the intellectual property provisions of the RCEP, particularly with regard to pharmaceuticals. A strong generic pharmaceutical industry exists in India, and stricter IP regulations could limit the country’s ability to produce affordable generic drugs, which are critical for the country’s healthcare system.

Labor Standards:

Since India has one of the largest labor forces in the world, some people were concerned that its participation in RCEP would expose its workers to lower labor standards than those in some member countries, and that would result in job losses and wage pressures for its workers.

Trade Deficit:

There was also concern regarding the overall impact of the Regional Comprehensive Economic Partnership on India’s trade balance. While the agreement might have enhanced exports in some sectors, there was a concern that the trade deficit would widen, increasing the pressure on the country’s current account balance.

Safeguard Mechanisms:

The Indian government felt that the safeguard mechanisms in the RCEP might not be strong enough to protect the domestic industries in the country. It wished to have more robust provisions in place to face any potential surge in imports.

Geopolitical Concerns:

There is no doubt that India’s decision was largely influenced by economic considerations; however, it was also influenced by geopolitical considerations, especially given tense relations with China. Being part of an agreement with China at the helm could have had wider strategic implications.

A comprehensive analysis of the country’s economic and strategic interests led to the decision of India not to join RCEP. The government considered the potential impacts of increased competition on the various sectors of the economy, especially those that are most vulnerable.

RCEP presented India with significant opportunities for trade, but India prioritized protecting its domestic industries, agriculture, and workers as well as maintaining policy flexibility in areas such as intellectual property policy.

There is no doubt that this decision was not merely a diplomatic maneuver, but rather a result of careful economic analysis and consideration of the nation’s long-term interests that was preceded by years of careful consideration.

Discuss the issues and challenges to the Indian Financial Sector in view of the recent developments in the global financial market.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Discuss the issues and challenges to the Indian Financial Sector in view of the recent developments in the global financial market.

During the past few years, the Indian financial sector has undergone significant changes. Many of these changes have been triggered by developments on the global financial market, which have affected the Indian financial sector in this context significantly. Here is a detailed analysis of the issues and challenges faced by the Indian financial sector, in this context.

“FDI has a positive impact on growth and employment but has also resulted in a number of negative externalities.” Comment.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

“FDI has a positive impact on growth and employment but has also resulted in a number of negative externalities.” Comment.

It has been widely acknowledged that Foreign Direct Investment (FDI) is a vital part of economic growth and development in many countries around the world. Nevertheless, like all economic phenomena, it also comes with negative aspects.

Our response will examine how foreign direct investment can have a positive impact on growth and employment while also contributing to negative externalities as well.

Identify the socio-economic and cultural factors that have led to the existence and persistence of child labour in India. Discuss some of the recent initiatives of the government to address the issue.

August 22, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Identify the socio-economic and cultural factors that have led to the existence and persistence of child labour in India. Discuss some of the recent initiatives of the government to address the issue.

There is no doubt that child labor in India is a complex problem. It has persisted for decades, yet the Indian government has instituted a number of measures to combat this problem. Our discussion will explore the reasons behind the persisting problem as well as these initiatives that have been initiated recently.

“Exclusion of service sector in W.P.I. is a major constraint in reflecting consumer inflation in India.” Comment.

August 19, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

“Exclusion of service sector in W.P.I. is a major constraint in reflecting consumer inflation in India.” Comment.

An important indicator of inflation in India is the Wholesale Price Index (WPI). It focuses primarily on tracking the changes in the prices of goods at the wholesale level, meaning it monitors price fluctuations of goods sold between businesses or at intermediate stages of production.

However, it excludes the service sector, which can indeed be considered a major constraint when it comes to reflecting consumer inflation in India. This issue can be explained in more detail here:

Composition of the WPI:

As a result of the WPI, the prices of raw materials, manufactured products, and agricultural commodities are primarily tracked. Compared to the Consumer Price Index (CPI), which includes a broad basket of goods and services that are consumed by households directly, the Consumer Price Index (CPI) includes a wider basket of goods and services.

However, the WPI does not directly capture consumers’ costs of living, despite the fact that it is useful for assessing inflationary pressures within the production and manufacturing sectors.

Changing Consumption Patterns:

There has been a significant shift in consumer preferences and consumption patterns in India over the years. The economy has evolved from being predominantly agrarian and manufacturing-based to becoming increasingly service-oriented.

There is a substantial portion of household expenditures dedicated to health, education, transportation, and communication. These services are not adequately included in the WPI, which is primarily based on goods.

Consumer Price Inflation vs. Wholesale Price Inflation:

As goods move from manufacturers to retailers to consumers, various markups, taxes, and distribution costs are not included in the WPI since it focuses on wholesale prices. As a result, the CPI is a more accurate measure of consumer inflation because it directly measures the final prices consumers pay, including all associated costs.

Inflation Mismatch:

Considering that the service sector is excluded from the WPI, it can offer an inaccurate picture of overall inflation. Even if the prices of goods in the WPI basket remain relatively stable, if service prices are rising rapidly, this can significantly impact the cost of living. Consumers may experience true inflationary pressures understated by the WPI due to this disconnect.

Policy Implications:

Inflation data can play a significant role in monetary policy decisions, such as setting interest rates. In order to formulate their policies, central banks like the Reserve Bank of India (RBI) use CPI data as a primary measure of consumer inflation. When services are excluded from the WPI, policy actions can diverge from actual economic conditions.

Policy Response:

In order to obtain a more comprehensive view of inflation, the Indian government has used the Consumer Price Index for Industrial Workers (CPI-IW) and the Consumer Price Index for Rural Laborers (CPI-RL) in conjunction with the WPI.

Therefore, when it comes to reflecting consumer inflation in India, the exclusion of the service sector from the Wholesale Price Index is indeed an important constraint. In order to get a better picture of inflation’s impact on Indian citizens, policymakers and economists use the Consumer Price Index (CPI), which includes a wider range of goods and services consumed directly by households. Despite its value for monitoring producer inflation, the WPI is less relevant when assessing consumer cost of living.

How can Smart City Mission address the socio-economic and environmental issues in urban India ?

August 19, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

How can Smart City Mission address the socio-economic and environmental issues in urban India ?

The Smart City Mission in India is a visionary and ambitious initiative launched by the Government of India in 2015 to transform and modernize the urban landscape across the country. Its primary goal is to make cities more livable, sustainable, and efficient, addressing a wide range of socio-economic and environmental issues in the process.

Let’s delve into how the Smart City Mission can address these issues in detail:

A) Infrastructure Development:

Transportation:

The Smart City Mission aims to improve urban mobility through the development of efficient public transportation systems, including metros, buses, and last-mile connectivity options, through the development of efficient public transportation systems. Traffic congestion and air pollution can be reduced by this, leading to better health for citizens as well as a cleaner environment.

Water Supply and Sanitation:

The urban areas of India could be improved if water supply and sewage systems were improved in order to improve the living conditions for residents, reducing the risk of health problems and the burden of waterborne diseases.

As a result, sanitation would improve, and public health would improve. It would also lead to a reduction in pollution in urban areas, which would in turn result in a better air quality and fewer environmental issues.

Enumerate the factors that have led to poor performance of India in human development.

August 19, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Enumerate the factors that have led to poor performance of India in human development.

India’s performance in human development has been a topic of concern for several decades, despite being one of the world’s fastest-growing economies. One of the biggest contributors to India’s poor human development performance is the country’s high population growth rate.

This has led to rapid urbanization, which has caused overcrowding in cities, leading to higher levels of poverty and a lack of access to basic services such as health care and education. Additionally, gender inequality is another major factor, as women still face many challenges when it comes to accessing education and employment opportunities.

Several factors contribute to this poor performance, and it’s important to analyze them in detail:

Income Inequality:

Income inequality is one of the most significant factors contributing to this problem. As a result of the vast disparity in income distribution in India, a small percentage of the population is in control of the vast majority of the wealth. Healthcare, education, and other essential services are inequally accessible to all because of this inequality.

Limited Access to Quality Education:

However, even though significant progress has been made in increasing literacy rates, the quality of education remains a major concern. There are many children, particularly those living in rural areas, who have limited access to high quality schools, qualified teachers, and educational resources. High dropout rates and poor educational outcomes further compound this problem.

Healthcare Inequality:

Despite its relatively developed healthcare infrastructure in urban areas, rural areas often lack access to quality healthcare services, which makes India’s healthcare system challenging in terms of accessibility and affordability. Health disparities result from high out-of-pocket expenses and inadequate public healthcare facilities.

Gender Disparities:

The prevalence of gender-based discrimination and disparities in India is very evident. There are many ways in which gender inequality manifests itself in India, including unequal access to health care, education, and economic opportunities. In addition to gender-based violence, cultural norms that limit women’s autonomy also contribute significantly to poor human development outcomes.

Malnutrition and Hunger:

In spite of considerable progress over the past few decades, India still faces a significant challenge when it comes to addressing malnutrition and hunger, especially among its children. Insufficient nutrition throughout early childhood can have long-term adverse impacts on the development of the child’s brain and body.

Sanitation and Clean Water:

In many parts of India, particularly in rural areas, it remains a challenge to access clean drinking water and proper sanitation facilities. Poor sanitation can cause health issues, including the spread of diseases, which could negatively impact human development in the long run.

Unemployment and Underemployment:

Economic growth has not been matched by the creation of quality jobs, and this has resulted in high rates of unemployment and underemployment, particularly among youth, due to the lack of productivity-driven employment opportunities. The lack of productive employment opportunities limits people’s chances of escaping poverty and improving their human development.

Environmental Degradation:

There are a number of severe environmental challenges facing India, including the pollution of air and water, deforestation, and climate change. These issues have direct and indirect impacts on human development, affecting health, livelihoods, and other aspects of overall well-being.

Inadequate Social Safety Nets:

A lack of robust social safety nets in India can exacerbate the impact of economic shocks and health crises by increasing the vulnerability of vulnerable populations to poverty as a result of insufficient public health care and social security, which are currently insufficient to protect the vulnerable from falling into poverty.

Corruption and Governance Issues:

A lack of good governance, a lack of transparency, and bureaucratic inefficiency significantly impact the success of social welfare programs. Corruption can be found in both the public and private sectors, and it can divert resources away from critical human development initiatives.

Lack of Access to Information and Technology:

During the digital era, access to information and technology has become critical to the development of human society. The digital divide between urban and rural areas, as well as the digital divide between various income groups, has the potential to limit opportunities for learning and economic participation.

Social and Caste Discrimination:

In India, there is still widespread discrimination based on caste, religion, and social status. In the presence of the same discrimination, marginalized groups experience limitations in opportunity, contributing to disparities in education, employment, and healthcare for those groups.

These multifaceted challenges must be addressed in India in order to improve human development outcomes. The right direction lies in comprehensive policies and investments in education, healthcare, social welfare, and economic opportunity, as well as efforts to reduce inequality and discrimination. Also, ensuring long-term human development gains requires sustainable development practices and environmental conservation.

“GST has curtailed the financial powers of the States under fiscal federalism.”

August 19, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

“GST has curtailed the financial powers of the States under fiscal federalism.”

There have been concerns about the impact of the Goods and Services Tax (GST) on the financial powers of the States under fiscal federalism, as it has been a significant reform to India’s indirect tax system. A detailed explanation of this statement will require us to examine the concept of fiscal federalism, the GST system, and how it has affected the powers of the States.

1. Fiscal Federalism:

The central government and the state governments share financial responsibilities and powers in fiscal federalism. Through the distribution of taxing powers between the Union (central government) and the States (state government), fiscal federalism is enshrined in the Indian Constitution.

States and the Union are allowed to levy taxes on certain items, such as land revenue, sales tax, and stamp duty, while the Union has exclusive rights to levy taxes on items like income, custom duties, and interest on securities. The Indian economy operates more smoothly as a result of this system, since the central government and the state government both receive their fair share of resources.

The central government has the authority to levy and collect taxes on certain subjects listed on the State List, while the states have the authority to levy and collect taxes on subjects listed on the Union List.

2. The Introduction of GST:

India introduced the GST on July 1, 2017 to replace multiple indirect taxes like VAT, excise duty, service tax, etc., with a single, comprehensive tax. Both the central government and the state governments can levy the GST on goods and services under the GST.

GST rates, exemptions, and other aspects are decided by the GST Council, which includes representatives from both the central and state governments. It has been credited with simplifying and streamlining the taxation process in India, increasing the tax base and reducing tax avoidance through the elimination of overlapping jurisdictions.

3. Impact on State Financial Powers:

a. Loss of Autonomy in Taxation:

GST has curtailed the autonomy of some States in taxation, which is one of their primary concerns. Prior to GST, states had considerable control over tax rates and policies. As a result of the introduction of GST, the Central Government is now in control of adjusting taxes and policies. This has caused some States to worry that their taxation autonomy has been compromised.

The introduction of GST has led to some States opposing its implementation. With the introduction of GST, the central government and state governments have shared the responsibility for levying and collecting taxes on goods and services. Consequently, States have fewer options in setting tax rates based on their fiscal needs.

b. Reduced Revenue from Local Taxes:

In the past, states collected revenue from local taxes like entry taxes, attribution taxes, and state-level VATs. GST has consolidated these sources of revenue. A central government compensation program for revenue losses due to the introduction of GST has been in place for some time, but there are concerns about its predictability and sustainability, especially over time.

As a result, there has been a call for better compensation mechanisms, greater state autonomy in setting tax rates and thresholds, and improved forecasting tools to ensure timely GST compensation payments.

c. Limited Control Over Tax Policies:

When decisions are made by consensus at the GST Council, States often have to compromise on their preferences for tax rates and policies. As a result, the States may not be able to respond to local economic conditions and fiscal needs.

Inefficient resource allocation and an uneven playing field can result from this. In addition, it may lead to lower tax revenues and a lack of incentives for the States to grow economically.

d. Loss of Revenue Due to Compensation Cess:

GST compensation cess was introduced to compensate States for revenue losses during the first years of GST implementation. Nevertheless, compensation cess has been viewed as a temporary solution, and it may not be a sustainable revenue source for states.

This can cause a huge financial burden on the States and lead to a loss of revenue. Due to this, basic services and amenities cannot be provided to citizens. The increase in taxes can also lead to an increase in living costs.

Enumerate the recent initiatives by the government to address the issues related to black money and parallel economy.

August 19, 2023 by Smirti

Indian Economic Service

Indian Statistical Service Examination, 2023

Enumerate the recent initiatives by the government to address the issues related to black money and parallel economy.

Here are some of the key initiatives by the government to address the issues related to black money and parallel economy.

Demonetization (November 2016):

A significant step had been taken by the Indian government under the Prime Minister Narendra Modi in tackling black money by demonetizing the high-denomination currency notes of Rs. 500 and Rs. 1,000 in order to combat black money. By doing so, black money in the form of cash holdings was rendered useless.

This move brought about a shift in people’s spending habits, with more and more people opting for digital payment methods. It also forced a shift in the black money economy to other illegal activities such as tax evasion and money laundering.

Implementation of GST (Goods and Services Tax):

In July 2017, the Goods and Services Tax was introduced in India in order to simplify the indirect taxation system. The Goods and Services Tax has been able to reduce the scope of tax evasion and the generation of black money as a result of complex taxation.

The Goods and Services Tax has also helped to streamline the taxation structure and reduce compliance costs for businesses. Furthermore, it has improved the efficiency of the Indian economy by increasing the number of taxpayers and reducing bureaucratic red tape.

Benami Transactions (Prohibition) Amendment Act, 2016:

This amendment empowered the government to confiscate benami properties (properties held in someone else’s name) and take strict actions against those involved in such transactions.

Offenders are liable for imprisonment of up to three years and/or a fine of up to 25 percent of the fair market value of the property. The amendment also provides for a special court to hear such cases and deliver judgments.

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:

Individuals with undisclosed foreign assets and income were targeted by this act. Those who failed to take advantage of this opportunity would face harsher civil and criminal penalties.

By declaring their foreign assets and paying a tax and penalty, they were given one-time compliance opportunities. There was a clear-cut way to avoid future legal troubles.

Pradhan Mantri Garib Kalyan Yojana (PMGKY):

By paying a tax, penalty, and surcharge, people could declare their undisclosed income and assets after demonetization. This scheme allowed people to come clean about their income, and it was a successful scheme, raising over Rs. 65,000 crore in taxes.

Money collected from this scheme was used for welfare programs. It was a voluntary disclosure window and allowed people to come clean about their income.

Operation Clean Money:

To identify and scrutinize individuals and entities who made large deposits or transactions during demonetization, the Income Tax Department launched Operation Clean Money. Individuals were required to provide bank account details and explain the source of their money to bring undisclosed income into the tax net.

The Income Tax Department launched a website to track suspicious deposits and transactions. In order to identify any discrepancies, the department cross-checked the information with its database.

Exchange of Information Agreements:

The Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) are among the international agreements India has signed for the exchange of financial information.

By detecting undisclosed offshore accounts and assets, India strengthens its tax base, increases revenue, and identifies potential money laundering and other illicit activities. In addition, it contributes to a fair global financial system by promoting tax compliance.

Amendments to the Prevention of Money Laundering Act (PMLA):

In order to strengthen the legal framework for combating money laundering, which is often associated with black money, the government amended the PMLA.

Additionally, the amendments will strengthen the existing framework by introducing new measures that will help combat the issue more effectively. They will also help ensure that the country’s financial system is more transparent and accountable.

Income Tax Reforms:

To streamline tax administration, the government has introduced measures such as e-assessment, faceless appeals, and prefilled tax returns, which have simplified tax laws, increased transparency, and reduced tax evasion.

By implementing these measures, taxpayers have been able to comply with taxes more easily, and the government has been able to reduce tax evasion. By providing an effective dispute resolution mechanism, the government has also taken several steps to reduce tax litigation.

Digital Payments and Electronic Transactions:

To track and regulate financial transactions more effectively, the government has encouraged digital transactions and reduced cash consumption in the economy. By providing tax incentives for digital payments and encouraging banks to issue debit cards to the unbanked, this has been accomplished.

The government has been able to collect more revenue from the digital economy due to these measures, which have reduced illegal activities such as money laundering and tax evasion.

These initiatives were aimed at tackling black money and the parallel economy by promoting transparency, improving tax compliance, and deterring tax evasion.