Daily News Analysis 18 July 2023

Table of Contents

GS-2

1.   Digital Personal Data Protection Bill 2023

GS-3

1. India-US Agreement to Settle WTO Disputes and Lift Retaliatory Tariffs
2. Fiscal Health of Indian States: A Macro View (FRBM Act)

Digital Personal Data Protection Bill 2023:

Context:

1. The Union Government has approved the Digital Personal Data Protection Bill.
2. The bill is expected to be presented in the upcoming monsoon session of Parliament.
3. It aims to address the need for a standalone law on data protection in India.

Key Features:

Applicability:

1. The bill applies to the processing of digital personal data collected online or offline and digitized.
2. It also applies to the processing of personal data outside India if it relates to offering goods or services or profiling individuals in India.

Consent:

1. Personal data can only be processed with lawful purpose and individual consent.
2. Notice must be provided before seeking consent, including details of the data to be collected and the purpose of processing.
3. Consent can be withdrawn at any time.
4. Exceptions for processing without explicit consent include functions under the law, provision of services by the State, medical emergencies, employment purposes, and specified public interest purposes.

Rights and Duties of Data Principal:

1. Data principals (individuals whose data is processed) have the right to obtain information about processing, seek correction and erasure of personal data, nominate representatives, and seek grievance redressal.
2. Duties of data principals include not filing false complaints or providing false information.

Obligations of Data Fiduciaries:

1. Data fiduciaries (entities processing data) must ensure data accuracy, implement security safeguards to prevent breaches, and cease data retention when no longer necessary.
2. Government entities have exemptions from storage limitation requirements.

Transfer of Personal Data:

1. The central government will notify countries to which personal data can be transferred, subject to prescribed terms and conditions.

Exemptions:

1. Certain exemptions exist for data processing by government entities in the interest of state security and public order, as well as for research, archiving, and statistical purposes.

Data Protection Board of India:

1. The Data Protection Board will be established to monitor compliance, impose penalties, address data breaches, and handle grievances.

Penalties:

1. Penalties for non-compliance range from up to Rs 10,000 for violating duties to up to Rs 250 crore for data breaches.

Issues and Analysis:

1. Concerns exist that exemptions for government agencies may lead to unchecked data processing and violate the right to privacy.
2. The proportionality of data collection and retention beyond necessity is questioned.
3. Recommendations for safeguards similar to those in other countries, such as the United Kingdom, are highlighted.

India-US Agreement to Settle WTO Disputes and Lift Retaliatory Tariffs:

Context:

1. India and the United States have reached an agreement to settle six trade disputes at the World Trade Organisation (WTO).
2. The decision was made during Prime Minister Narendra Modi\’s visit to the US at the invitation of President Joe Biden.

Key Points:

1. The settlement of the disputes is expected to boost trade between India and the US.
2. Indian exporters will benefit from key tax advantages as a result of this agreement.
3. In 2018, the US imposed import taxes on certain steel and aluminum products citing national security.
4. In response, India imposed customs duties on various American goods in 2019.
5. The agreed settlement involves lifting retaliatory tariffs on certain US products and restoring market opportunities for American agricultural producers and manufacturers.
6. The disputes cover areas such as solar cells and modules, hot-rolled carbon steel flat products, export-related measures, renewable energy, steel and aluminum products, and additional duties on some US products.

Dispute Settlement under WTO:

1. The WTO is responsible for settling trade disputes among its member nations.
2. Disputes arise when one country\’s trade policy measure is seen as a violation of WTO agreements or a failure to meet responsibilities.
3. The WTO\’s Dispute Settlement Understanding provides procedures for resolving disputes through bilateral consultations and, if necessary, adjudication by panels and the Appellate Body.
4. The WTO has a robust dispute-resolution process, having heard over 610 disputes and delivered over 350 judgments since 1995.

Stages in a WTO Dispute Settlement:

1. Parties\’ discussions: The involved countries engage in bilateral consultations to reach a mutually acceptable solution.
2. Adjudication: If a mutually acceptable solution is not reached, panels and the Appellate Body adjudicate the dispute. Their reports become binding on the parties once adopted by the Dispute Settlement Board.
3. Ruling implementation: The losing party must implement the ruling, and failure to do so may result in countermeasures.

Fiscal Health of Indian States: A Macro View (FRBM Act)

Context:

1. States in India mobilize more than a third of total revenue, spend 60% of combined government expenditure, and account for around 40% of government borrowing.
2. Understanding the fiscal health of states is crucial to assess the overall fiscal situation of the country.

Fiscal Imbalance and Consolidation:

1. Post-pandemic fiscal corrections have led to a decline in the general government deficit and debt.
2. The fiscal deficit at the Union level decreased from 9.1% of GDP in 2020-21 to 5.9% in 2023-24 (BE).
3. All-state fiscal deficit reduced from 4.1% of GDP in 2020-21 to 3.24% in 2022-23 (RE).
4. Major states are expected to have a fiscal deficit of 2.9% of GDP in 2023-24 (BE).

Fiscal Challenges:

1. Despite the reduction in fiscal deficit, revenue deficits of states remain a concern.
2. Out of 17 major states, 13 states have deficits in the revenue account, with seven states primarily driven by revenue deficits.
3. These states include Andhra Pradesh, Haryana, Kerala, Punjab, Rajasthan, Tamil Nadu, and West Bengal, which also have high debt-to-GSDP ratios.
4. Increasing revenue deficits can have long-term fiscal implications and need to be corrected.

Impact on Macroeconomic Stability:

1. The combined fiscal deficit of these states is 3.71% of GSDP, higher than the all-state average.
2. Their combined revenue deficit is 2.15% of GSDP, while the all-state average is 0.78%.
3. The combined debt ratio is higher than the recommended level for all states by the Finance Commission.
4. These states contribute around 40% to India\’s GDP, making their fiscal stability crucial for overall economic growth.

Framework for Revenue Deficit Consolidation:

1. Long-term focus on managing revenue deficit is necessary.
2. Interest-free loans to states by the Union Government can be linked to a reduction in revenue deficit.
3. Performance incentive grants could be considered for reducing revenue deficits.
4. A defined time path for revenue deficit reduction and a credible fiscal adjustment plan would help restore fiscal balance and improve expenditure quality.

Fiscal Responsibility and Budget Management (FRBM) Act

The Fiscal Responsibility and Budget Management (FRBM) Act is an Indian legislation enacted in August 2003. Its key features and provisions are as follows:

Objectives:

1. Ensure inter-generational equity in fiscal management.
2. Promote long-term macroeconomic stability.
3. Set limits on the Central government\’s debt and deficits.

Main Provisions:

1. Fiscal Deficit Limit: The Act initially set the fiscal deficit target for the Central government at 3% of the GDP. This target can be revised through amendments to the Act.
2. State Responsibility: The 12th Finance Commission\’s recommendations in 2004 linked debt relief for states with their enactment of similar financial responsibility laws. States are required to limit their annual budget deficits to 3% of their Gross State Domestic Product (GSDP).
3. Transparency and Medium-Term Fiscal Policy: The Act mandates greater transparency in the fiscal operations of the Central government and the conduct of fiscal policy. The Union Budget includes a Medium-Term Fiscal Policy Statement, specifying revenue and fiscal deficit goals over a three-year horizon.
4. Amendments and Targets: The Act\’s rules were initially notified in July 2004, with subsequent amendments, including the most recent amendment in 2018. The Act currently sets a fiscal deficit target of 3.1% for March 2023. The NK Singh committee recommended a fiscal deficit target of 3% of GDP up to March 2020, 2.8% in 2020-21, and 2.5% by 2023.

Relaxation under FRBM Act:

The Act provides for an escape clause under Section 4(2), allowing the Central government to exceed the annual fiscal deficit target under certain circumstances. These grounds include national security, war, national calamity, collapse of agriculture, structural reforms, and a decline in real output growth of a quarter by at least three percentage points below the average of the previous four quarters.