Current Affairs Focus Classes

Indian Economy
Class-3
1 SC Judgement on GST Council

2 Computerisation of PACS

3 Privatisation of Public Sector Banks (PSBs)

4 Prelims Questions for Practice

 Topic 1: SC Judgement on GST Council
Details about GST Council
The GST Council is a constitutional body under Article 279A for making recommendations to the Union and State Government on
issues related to Goods and Service Tax.
Mandate: Make recommendations to the Union and States on the following
 Recommend Taxes, surcharge, and Cess to be subsumed into GST.
 Model GST laws
 Recommend GST Rates.
 Recommend the date on which the GST be levied on petroleum crude, high speed diesel, petrol, natural gas and aviation
turbine fuel.
 Recommend threshold limit of turnover below which GST may be exempted.
 Any other matter related to GST, as the council may decide.
Composition: Chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and
Ministers in-charge of Finance of all the States.
Decision Making: Voting Weightage- Centre (1/3) and all States (2/3). Decision shall be taken by a majority of not less than three-
fourths of the weighted votes of the members present and voting. Thus, Central Government has an effective veto on all decisions
of the GST Council.
Quorum: Half of the total members
Arguments of the Centre Supreme Court Judgement on GST Council
Certain provisions of the IGST Act, CGST Act and SGST Acts The GST council may make two types of recommendations- (a)
explicitly provide that the Government shall take decisions which would require the Government to issue notification (b)
based on the recommendations of the GST Council. However, which require the legislatures to make laws related to GST.
If the recommendations of the GST council are not binding, then
different states could impose different tax rates on goods and Recommendations such as changes in GST rates require the
services which would defeat the purpose of "One Nation, One Government to issue notifications. Such recommendations
Tax". would be binding on Centre and States. This would help realise
the framework of "One Nation One Tax".

However, recommendations which require the legislatures to

make laws related to GST would not be binding on the
Parliament and State legislature.
 Topic 2: Cabinet approves computerisation of PACS

Details about Primary Agricultural Credit Societies (PACS)

These societies are generally started by 10 or more persons who contribute a nominal amount. The working capital of the PACS is
derived mainly from borrowings from Central Co-operative Banks (CCBs) and the small proportion from owned funds and deposits
from members. In general, only the members of a PACS are entitled to borrow from it.
Main Functions of PACS
 Provide short-term and medium-term credit for agriculture and allied activities.
 Distribute inputs such as seeds and fertilisers.
 Provide various agricultural implements on rent to the farmers.
 Provide marketing facilities for the sale of agricultural produce.
 Provide loans for non-agricultural purposes such as purchase of consumer durables, housing loans, education loans and
professional loans.
Importance of PACS Challenges of PACS
Improve Agricultural Credit: The PACS have the potential to Source of financing: Only about 10% of the agricultural loans
increase share of institutional credit (70%) and free the farmers provided by PACS were supported through deposits mobilised
from the debt trap of moneylenders. by PACS. The rest 90% of the loans provided by PACS were raised
Improved access to inputs to make agriculture more profitable through borrowings from the Central Co-operative Banks
and financially viable. (CCBs).
Reduce Post-harvest losses: According to NITI Aayog, the post- Inadequate coverage:
harvest losses amount to Rs 90,000 crores on an annual basis.  Only 50% of the rural households covered as members
Promote financial inclusion through inculcation of saving habits in PACS
and improving credit.  Poor coverage of PACS in certain parts Example:
Promote Economic democracy and promote Social Capital at Northeast India
grass roots level as evident in the success of Milk revolution Inadequate Credit: Out of the total membership of over 9
through the AMUL Model. crores, only around 4 crore members availed loans from PACS.
Nature of Credit: Only around 59% of the loans provided by the
PACS were agricultural loans. Remaining 41% of the loans were
in the form of non-agricultural loans for consumer durables,
housing loans, education loans and professional loans.
Vicious Cycle: The financial position of PACS is weak due to
inadequate membership and they do not attract enough
membership due to their poor financial position.
 Topic 3: Privatisation of PSBs

Present Status of Public Sector Banks (PSBs)

 PSBs account for 80% of the overall NPAs of the Banking sector.
 Higher Losses of around Rs 66,000 crores. This is almost equal to the budgetary allocation for the Primary Education in India.
 Higher Banking Frauds accounting for 93% of total frauds.
 Loss of Taxpayers' money: According to the Economic Survey 2019-20, every rupee of the taxpayers' money which is invested in
PSBs fetches a market value of 71 paise. On the other hand, every rupee invested in NPBs fetches a market value of Rs 3.70 i.e.,
more than five times as much value as that of a rupee invested in PSBs. This shows that the taxpayers' money is inefficiently
deployed in the public sector Banks which in turn is leading to loss of both the Government as well as the taxpayers.
 Lower Efficiency in the form of lower Return on Assets, Return on equity and indicators like capital adequacy ratio.
 Prelims MCQ

1. With respect to GST Council, consider the following statements:

1. The GST Council has been empowered to recommend to bring petroleum products under GST without the need
for constitutional amendment.
2. None of the Union Territories (UTs) have been given representation in the GST council.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: a

2. Which among the following is/are roles and responsibilities of the GST Council?
1. To notify the GST Rates on different Goods and Services
2. To bring Petroleum Products under GST
3. Establishment of Adjudicating mechanism to handle disputes.
Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 3 only

Answer: d

3. Which among the following taxes is/are subsumed under the Goods and Services (GST) in India?
1. Alcohol for Non-Human Consumption
2. Additional Excise duty on Tobacco
3. Octroi Duty
4. Entertainment Tax
Select the correct answer using the code given below:
(a) 1 and 3 only
(b) 2 and 3 only
(c) 2 and 4 only
(d) 1, 2, 3 and 4 only

Answer: a

4. Consider the following statements related to GST Council:

1. The GST Council is headed by Union Finance Minister.
2. The Union Minister of State for Finance acts as Vice Chairperson of GST Council
3. The Chairman of Central Board of Excise and Customs (CBEC) acts as Ex-officio secretary to the GST Council.
Which among the statements given above is/are incorrect?
(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 3 only

Answer: b

5. With respect to Primary Agriculture Credit Societies (PACS), consider the following statements:
1. The Primary Agricultural Credit Societies (PACS) are within purview of Banking Regulation Act, 1949.
2. The PACS are under the dual regulation and control of RBI and Registrar of Cooperative societies.

Which among the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: d

6. With respect to Urban Cooperative Banks, consider the following statements:

1. All the Urban Cooperative Banks have been categorised as Scheduled Banks by the RBI.
2. The Urban Cooperative Banks are under the complete control and regulation of RBI alone.
Which among the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: d

7. Which of the following statements is/are correct regarding the Banking Regulation (Amendment) Act, 2020?
1. This amendment has done away with the dual regulation of Cooperative Banks and has brought them under the
complete control of the RBI.
2. It has empowered the RBI to supersede the Board of Directors of the Cooperative Banks.

Select the correct answer using the code given below:

(a)1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: b

8. Consider the following statements:

1. The Public Sector Banks (PSBs) do not require license from the RBI for their operations.
2. The Public sector Banks are regulated by the RBI under the Bank Nationalisation Acts.
Which among the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: a

9. Which among the following is/are not the likely effects of Privatisation of Public Sector Banks (PSBs)?
1. Hurt Financial Inclusion
2. Make Indian Economy more immune to global external shocks.
3. Increase financial burden on Government
Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 3 only
(d) 1 and 2 only

Answer: b

10. Consider the following statements related to Public Sector Banks in India:
1. The Public Sector Banks are under dual regulation of both RBI and Government.
2. The Bank Nationalization Acts require the Government to hold majority ownership in the Public Sector Banks.
Which among the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: c