Get Smart Fast | Cauvery Dispute

Here’s a short video of protests this week in Karnataka over Cauvery water.

So, what’s going on?

The dispute relates to sharing of Cauvery river water among four southern states – Karnataka, Tamil Nadu, Kerala and Pondicherry. The river originates in Karnataka, and the state can regulate water flows to downstream states like Tamil Nadu.

The dispute has been there for more than a century. In 2007, the Cauvery Water Disputes Tribunal gave its final verdict determining how the water will be shared. This came 16 years after the tribunal was established and 570 days of sitting.

 

What did the order say?

The tribunal estimated quantum of water available for sharing as 740 thousand million cubic feet or TMC. (If you’re stumped by what these units are, don’t worry. We have a small note on what they mean). Then it determined how this water will be shared among the four states:

Tamil Nadu – 419 TMC
Karnataka – 270 TMC
Kerala – 30 TMC
Pondicherry – 7 TMC

Further it gave a month-wise release of water from Karnataka to Tamil Nadu, the two major states in the dispute.

 

If the order has clearly detailed how to share water, where is the problem?
The final order only defined ‘normal year’ when the total available water in the cauvery basin is 740 TMC. But there was no such estimate when the water availability falls due to poor monsoon. The verdict only states, “….in a distress year, the allocated shares shall be proportionately reduced among the states….”

Karnataka now claims it has very low level of water in the reservoir because of poor rains, and refused to release water.

 

Now Supreme Court asked Karnataka to release 15,000 cusecs of water for 10 days. How much is that?

Cusec is the short form for cubic foot per second or the flow of water per second. One cusec is 28.317 litres of water. TMC is thousand million cubic feet.

If 11,000 cusecs of water is released for a day, then the total quantum of water is 1 TMC. So for 15,000 cusec, it is equivalent to 1.36 TMC.

If 15,000 cusecs of water is released for next 10 days, the total quantum is 13.63 TMC of water. That’s equivalent to filling 1.55 lakh olympic size swimming pools.

In comparison, Tamil Nadu is entitled to 40 TMC of water in September as per final order of the tribunal.

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    India’s latest GDP Numbers: Five things you must know

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    Growth has slowed down: Asia’s third largest economy grew at 7.1% in quarter ended June 2016. This is the slowest in five quarters, and much lower compared to 7.9% recorded in the preceding three months.

    Manufacturing picks up, but corporate investment still down: Manufacturing registered 9.1% growth in first quarter of current fiscal, as compared to 7.3% in same quarter last year. So this alone contributed one-fifth of India’s GDP growth.
    However, corporate investment dipped by 3% (or by Rs 21,009 crore as measured in 2011-12 prices).
    What does this say? Demand might have picked up resulting in higher manufacturing output. But not enough for the companies to see the invest in additional capacity.
    When Indian economy was growing at 9% plus for five years in 2000-10, investment demand accounted for nearly half of the growth.

    Government spending spurts: Nearly a fifth of GDP growth in latest quarter is due to government spending. This is clearly not sustainable as it would lead to widening fiscal deficit. Higher fiscal deficit will increase cost of borrowing for all others in the economy.

    Exports finally showing growth: After many quarters of decline, exports reported a 3% increase. This is a positive as many export oriented industries are manpower-intensive sectors. This will create more jobs.

    Mining, hotel, construction industries have slowed down

     

    The positives: stable private consumption, growth in exports, pick up in manufacturing output.

    The negatives: higher government spending not sustainable, key industries like mining and construction still sluggish, and corporate investment yet to pick up.

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      Is the Indian love for gold tapering?

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      Three months is a small time to determine whether it’s a trend or not. But the latest GDP numbers released by the Statistics Ministry shows India’s love for gold has come down by nearly half.

      First, a background. There are two ways to estimate GDP growth numbers. The first is by estimating what different industries like agriculture, manufacturing, construction etc., have produced. The second way is to estimate the expenditure by private consumers, government and investment by companies.  This is where you will find ‘valuables’.

      Valuables are money spent in buying precious stones and metals like gold, diamonds and silver. Some might argue these are investments, and therefore capital. But they cannot be classified as capital as they are stored and not put to use. So a separate head is created while estimating GDP.

      Measured at 2011-12 prices, valuables stood at Rs 22,129 crore in April – June 2016 as compared to Rs 43,138 crore in April – June 2015.

      The big question: Is this an exception or an indicator of Indians finally moving away from buying gold?

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        Get Smart Fast | Six things you have to know about GST

        GST

         

        Goods and Services Tax (GST)

        Before delving into what GST is, let’s understand how taxes are collected in India. Taxes can be broadly classified under three buckets – income, production and consumption. The central government has the complete right (almost) to tax income and production in the form of income tax and excise duty. When it comes to consumption, both the central and state governments levy taxes in the form of service tax and Value added Tax (VAT). Income taxes are directly collected from people who earn salaries or companies that report profits. The others are paid by producers (Maruti Suzuki) or service providers (restaurants) but are collected from buyers. These are called indirect taxes.

         

        What would the GST do?

        It would merge almost all the indirect taxes into one tax that will be applicable all over India at a single rate. A car produced by Maruti would attract a single tax rate irrespective of where it is purchased.

         

        Why do we need this Constitution Amendment Bill?

        With GST, both the centre and the states will have powers to tax both production and consumption. States, at present, don’t have the powers to levy taxes on production, except on alcohol. Changing this means amending the constitution. And, amending the constitution requires two-third majority in both the Lok Sabha and the Rajya Sabha. Plus, half the states have to ratify the bill.

         

        What happens next? Will GST be implemented from next month?

        • The Constitution Amendment Bill is like an enabling Act to roll out GST. The next steps include:
          50% of states have to approve the bill.
        • Once approved, both the centre and states will come out with laws that will administer GST.
        • The final decision on what the GST rate will be is yet to be taken. It could be 15% or 18%.
        • The technology and administrative platforms are being developed to handle paperwork but it remains to be seen when these could be rolled out.

        Nevertheless, the Constitution Amendment Bill was the biggest task and it sorted out major issues. Now that there is a consensus, the rest would fall in place.

         

        How will it benefit me?

        It depends on the GST rate, which is yet to be agreed upon.

        In 2010, Maruti’s Ritz attracted an indirect tax of 24%. This includes 12.5% VAT, 9% excise duty, 1-2% entry tax, 2% CST (Central Sales Tax), and registration charges.

        Let’s say if the GST rate is 16%, then there will be a Rs 30,000 reduction in taxes. Of course, it depends on whether Maruti decides to pass on the benefit of this tax reduction.

        If the GST rate is fixed at 18%, then all services will become costlier – from eating out to telephone bills – as the current service tax is at 15% including cess.

         

        How will companies benefit from GST?

        • Optimal location of warehouses – at present, companies have warehouses in each of the states they operate. If they don’t do so, the dealer (who buys goods from the producer) has to pay CST of 2%. Now, CST would be absorbed into GST. Therefore, companies can locate warehouses to optimally distribute their goods.
        • Lower price could lead to higher demand – A reduction in price because of lower taxes will stimulate demand, and this in turn could lead to higher investments.

         

        Are there any negatives?

        Yes. Services account for more than half of the Indian economy. If the GST rate is higher than the 15% being levied now, then inflation will go up.

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