August 7th 2024 Current Affairs

1. Bangladesh’ garment industry facing temporary shut down

Context and Background

  1. Bangladesh’s Garment Industry Overview
  • Economic Importance: The garment industry is pivotal for Bangladesh, contributing over 85% of merchandise exports and more than 70% of total exports. It is a major employer, with over 4 million workers.
  • Global Trade Position: Bangladesh holds a significant share in global clothing trade (7.9%), compared to India’s 3.2%.
  1. Current Crisis
  • Political Turmoil: Political instability in Bangladesh has led to economic disruptions, particularly in the garment sector. Vandalism and violence have caused factory shutdowns, impacting production.
  • Impact on Supply Chain: The disruption has raised concerns about shifting global textile orders to other countries, including India.

Implications for India

  1. Opportunities and Challenges
  • Potential Shift in Orders: With Bangladesh’s disruption, global buyers might temporarily shift their orders to India. This could benefit Indian apparel exporters in the short term.
  • Capacity Constraints: India’s garment industry faces its own challenges, including a stressed supply chain and capacity limitations. Indian textile infrastructure, such as Ahmedabad’s fabric processing units, is also affected by pollution controls.
  1. Impact on Indian Textile Industry
  • Industry Response: Indian exporters are making efforts to capitalize on this opportunity but must navigate existing domestic constraints.
  • Competition with Other Countries: Vietnam might also benefit from the disruption in Bangladesh, as it is well-positioned to absorb the demand.

Broader Economic and Geopolitical Impact

  1. Global Retail Market
  • Ripple Effects: Disruptions in Bangladesh may lead to delays and reduced availability of products from major global brands, impacting global inventory levels and sales.
  • Supply Chain Disruptions: Brands with substantial supply chains in Bangladesh may face significant disruptions, affecting their production schedules.
  1. Economic Outlook for Bangladesh
  • Growth Moderation: Bangladesh’s economic growth has moderated following rapid expansion in previous years. Challenges include high inflation, rising domestic interest rates, and limited foreign exchange access.
  • Long-Term Prospects: Despite current difficulties, Bangladesh’s underlying growth potential remains strong, with a robust long-term growth outlook according to S&P Global Ratings.

2. GST on health insurance

Context and Background

  • GST on Insurance Premiums: GST at 18% applies to health and life insurance premiums, up from the previous combined rate of 15% (including service tax, Swachh Bharat cess, and Krishi Kalyan cess).
  • Recent Developments: Premiums for health and life insurance have surged by up to 50-60% in the current year, driven by GST and rising medical inflation, making insurance less affordable.

Key Data Points                                                                 

 

1.  Insurance Market Size

·         General Insurance: Rs 1,09,000 crore collected in health insurance premiums in FY2023-24.

·         Life Insurance: Rs 3,77,960 crore in premiums collected in FY2024, with LIC contributing Rs 2,22,522 crore.

2. Regional Contributions

·         Concentration: Five states (Maharashtra, Karnataka, Tamil Nadu, Gujarat, Delhi) contributed 64% of the total health insurance premium in 2022-23.

3. Insurance Penetration Trends

·         Life Insurance: Reduced from 3.2% in FY2021-22 to 3% in FY2022-23.

·         Non-Life Insurance: Stagnated at 1%, leading to an overall reduction in insurance penetration from 4.2% to 4%.

 

 

Arguments for Removing or Reducing GST

Affordability Issues

  • Increased Premiums: The GST rate has contributed to higher premiums, making insurance less affordable, particularly in the face of medical inflation.
  • Policyholder Impact: Frequent premium hikes and high medical inflation have led to a decline in policy renewals, with health insurance becoming increasingly out of reach for many.

Global Comparison

  • International Practices: Countries like Singapore and Hong Kong do not impose GST or VAT on insurance premiums, suggesting a potential benefit of removing GST in India.

Economic and Social Impact

  • Insurance Penetration: India’s insurance penetration is low compared to global standards. Reducing GST could improve affordability and increase insurance coverage, aligning with the “Insurance for All by 2047” goal.

Recommendations and Reports

  • Standing Committee on Finance: The committee has recommended rationalizing GST rates on insurance products to enhance affordability, particularly for health and term insurance.

Arguments for Maintaining or Adjusting GST

Revenue Considerations

  • Government Revenue: GST on insurance premiums contributes significantly to government revenue, with Rs 21,256 crore collected over the past three years.
  • Industry Impact: GST helps maintain uniform taxation across services and supports government funding.

Policy and Regulatory Framework

  • GST Council Decisions: GST rates are set by the GST Council, which includes both central and state finance ministers. Changes require consensus among multiple stakeholders.

Cost and Inflation Factors

  • Insurance Costs: Insurers cite rising costs due to inflation and increased claims, which might offset any potential benefit from a reduced GST rate.

3. Ayushman Bharat Scheme: Senior Citizens Focus

1.     Ayushman Bharat Scheme: Senior Citizens Focus

                                 

  1. Overview
  • Scheme: Ayushman Bharat provides up to ₹5 lakh annual health coverage.
  • Senior Citizens: Individuals aged 70 and above make up 12% of admissions and incur nearly 14% of total treatment costs.
  1. Expenditure Data (Till January 2024)
  • Total Spend: ₹79,200 crore.
  • For Seniors (70+): ₹9,878.5 crore spent on 57.5 lakh admissions.
  1. Top States
  2. Expansion Proposal
  • Current Coverage: Limited to economically disadvantaged individuals aged 70+.
  • Proposed Expansion: Include all seniors regardless of economic status, adding ~4 crore beneficiaries.
  • Cost Implications: Higher due to increased utilization and higher premiums for older adults.
  1. Budgetary Aspects
  • Allocation: Increased by ₹100 crore to ₹7,300 crore in the latest budget, potentially insufficient for expansion.
  1. Demographic Trends
  • Future Projections: Population over 60 to rise from 8.6% in 2011 to 19.5% by 2050, with numbers tripling from 103 million to 319 million.

4. India-Fiji Relations

CONTEXT: President Murmu conferred with Fiji’s highest civilian award, the Companion of the Order of Fiji.

Historical Background:

  • Diplomatic Relations:Established in 1970, soon after Fiji gained independence from Britain.
  • Indian Diaspora:Significant Indian community in Fiji, descendants of indentured laborers brought by the British in the 19th and 20th centuries.

 

Key Areas of Cooperation:

  1. Humanitarian Assistance & Disaster Relief:
  • India has provided aid during natural disasters in Fiji, including cyclones and floods.
  1. Defense Cooperation:
  • Training and capacity-building programs for Fijian defense personnel.
  1. Agriculture and Allied Sectors:
  • Collaboration in agricultural research and development, including the introduction of new farming techniques and technologies.
  1. Education and Capacity Building:
  • Scholarships and training programs for Fijian students and professionals under the Indian Technical and Economic Cooperation (ITEC) program.
  1. Health Sector:
  • Medical camps and donation of essential medicines and equipment.

 

Recent Developments:

  • High-Level Visits:
  • President Droupadi Murmu’s visit to Fiji in August 2024, the first by an Indian head of state.
  • Bilateral talks with Fijian President Ratu Wiliame Maivalili Katonivere.
  • Climate Justice:
  • India advocating for climate justice for Fiji and other ocean states, emphasizing climate finance and technology.
  • Awards and Recognition:

 

Strategic Importance:

  • Geopolitical Significance:
  • Fiji’s strategic location in the South Pacific makes it an important partner for India in the region.
  • Part of India’s Act East Policy, aiming to strengthen ties with Pacific Island Countries (PICS).
  • Cultural and People-to-People Ties:
  • Strong cultural connections due to the Indian diaspora.
  • Regular cultural exchanges and events to promote mutual understanding and goodwill.

 

Quotes:

  • President Droupadi Murmu: “As India emerges strongly on the global stage, we stand ready to partner with Fiji, according to your priorities, to build a stronger, resilient, and more prosperous nation.”
  • On Climate Justice: “We will continue to stand shoulder-to-shoulder with Fiji and other ocean states for climate justice.”

5. New finding on Sucralose – an Artificial sweetener

CONTEXT: Judicious use of sucralose can help reduce calories and sugar intake. Dr. V. Mohan emphasized that sweeteners used sparingly in India show no harm and may offer marginal health benefits.

  • Potential benefits for dietary compliance and cardiometabolic health.
  • Relevance : WHO caution against non-nutritive sweeteners (NNS) for non-diabetics to control body weight.
  • Quotes V. Mohan: “The study shows that there is no harm in taking sweeteners. In fact, there was a marginal improvement in body weight, BMI, and waist circumference with no impact on glucose or HbA1c levels.”

 

                           List of some artificial sweeteners

Artificial Sweetener

Description

Aspartame

Commonly used in diet sodas and sugar-free products. Known for its intense sweetness.

Saccharin

One of the oldest artificial sweeteners, used in various food and beverage products.

Sucralose

Found in many sugar-free and low-calorie products. Known for its stability at high temperatures.

Acesulfame Potassium (Ace-K)

Often used in combination with other sweeteners in beverages and baked goods.

Neotame

Similar to aspartame but much sweeter. Used in a variety of food products.

Advantame

Newer sweetener, much sweeter than aspartame and neotame. Used in small quantities.

Cyclamates

Banned in some countries but still used in others. Often combined with other sweeteners.

Stevia

Derived from the leaves of the Stevia plant. Considered a natural sweetener but often included in discussions of artificial sweeteners.

Monk Fruit Extract

Derived from monk fruit. Provides sweetness without calories.

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