India and Pakistan agrees to observe “2003 Ceasefire agreement”

In News:

India and Pakistan have issued a joint statement to strictly observe the 2003 Ceasefire agreement along the Line of Control (LoC).

About the 2003 ceasefire agreement:

The ceasefire agreement was reached in November 2003, four years after the Kargil War.

On November 26, 2003 the ceasefire took effect along the entire stretch of the India-Pakistan frontier.

It facilitated the opening of the Srinagar-Muzaffarabad and Poonch-Rawalkot routes, paving the way for bus and truck services linking the two Kashmirs for the first time in six decades and encouraging cross-LoC contacts, exchanges, travel, and trade.

The ceasefire also enabled India to complete the construction of a fence near the LoC to prevent Pakistan’s infiltration of terrorists into Kashmir, a project that it had begun a couple of decades earlier but had to suspend due to Pakistan’s artillery fire.

Will this ceasefire last?

This is not the first time that India and Pakistan have agreed to give peace a chance on the LoC to make the lives of civilians living along the line easy.

The 2003 ceasefire agreement remains a milestone as it brought peace along the LoC until 2006. Between 2003 and 2006, not a single bullet was fired by the jawans of India and Pakistan.

But since 2006, ceasefire violations became the norm with increasing frequency. Recent years have seen an increasing number of ceasefire violations despite an agreement reached in 2018 to adhere to the 2003 ceasefire agreement.

What’s the concern?

This puts a question mark on how long the fresh commitment to ceasefire along the LoC can hold especially with summers approaching. As a matter of annual routine, terror infiltration bids from Pakistan increase as summer begins in the Kashmir Valley. Melting of ice on the high mountains offers Pakistan an opportunity to foment terrorism in the Valley.

India ‘out of recession’

In News:

As per the National Statistical office (NSO), India’s economy is out of recession but still a long way from returning to rates of growth seen before the pandemic.

India- Asia’s third biggest economy recorded a rise in gross domestic product of 0.4% in the final three months of 2020, compared with the same period a year earlier.

Details:

Last year, the country plunged into recession for the first time in nearly a quarter of a century, with economists warning that it would struggle to recover from the slump.

Key takeaways from Q3 GDP data:

• Manufacturing revival.
• Agriculture growth accelerates.
• Financial, real estate sectors rebound.
• Consumer confidence still low.
• Government spending picks up.
• Investment demand rises.

What is Recession?

It is a macroeconomic term that refers to a slowdown or a massive contraction in economic activities for a long enough period, or it can be said that when a recessionary phase sustains for long enough, it is called a recession.

Depression:

It is a deep and long-lasting period of negative economic growth, with output falling for at least 12 months and GDP falling by over 10% or it can be referred to as a severe and prolonged recession.

Inflation Targeting

In News:

The Reserve Bank of India, in the Report on Currency and Finance for FY21, has said the current inflation target of 4% with a +/-2% tolerance band is appropriate for the next five years.

Important observations made:

Trend inflation had fallen from above 9% before flexible-inflation targeting (FIT) to a range of 3.8-4.3 % during FIT, indicating that 4% is the appropriate level of the inflation target.

An inflation rate of 6% is the appropriate upper tolerance limit for the target.

A lower bound above 2% can lead to actual inflation frequently dipping below the tolerance band while a lower bound below 2% will hamper growth, indicating that an inflation rate of 2 % is the appropriate lower tolerance bound.

Outcomes of FIT:

During the FIT period, monetary transmission had been full and reasonably swift across the money market but less than complete in the bond markets.

While there has been an improvement in transmission to lending and deposit rates of banks, external benchmarks across all categories of loans and deposits could improve transmission further.

Flexible Inflation Targeting Framework:

Now there is a flexible inflation targeting framework in India (after the 2016 amendment to the Reserve Bank of India (RBI) Act, 1934).

 Who sets the inflation target in India?

The amended RBI Act provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once every five years.

Current Inflation Target:

The Central Government has notified 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016, to March 31, 2021, with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.

Vivad Se Vishwas scheme

In News:

The Income Tax Department on Friday extended the deadline for filing declarations and making payment under the direct tax dispute resolution scheme ‘Vivad Se Vishwas’ (VsV) till March 31 and April 30.

About the Scheme:

The Direct Tax ‘Vivad se Vishwas’ Act, 2020 was enacted on March 17, 2020, with the objective to reduce pending income tax litigation, generate timely revenue for the government and to benefit taxpayers.

The scheme aims to end litigation and legacy disputes under the direct taxes category as ₹9.32 lakh crore worth of revenue is blocked in approximately 4.8 lakh appeals pending at various income tax appellate forums.

The entities who opt for the scheme have to pay a requisite tax following which all litigation against them are closed by the tax department and penal proceedings dropped.

Significance of the Scheme:

It should be noted that the response to the scheme gains significance given earlier schemes like Kar Vivad Samadhan Scheme, 1998 (KVSS) and Direct Tax Dispute Resolution Scheme, 2016 (DTDRS) did not yield much results.

• The scheme has reportedly received an overwhelming response with a settlement amount of over Rs 97,000 crore as of February.
• So far, over 1,25,144 of the 5,10,491 long-pending cases have been settled under the scheme.
• These comprise 24.5 per cent of the total number of such cases which were pending before the scheme was introduced.