What’s in today’s article?

• Why in News?
• What is DTAA Between India and Mauritius?
• Significance of the DTAA Between India and Mauritius
• What is the Amendment to the DTAA Between India and Mauritius?
• Need to Amend the India-Mauritius DTAA

Why in News?

The Income Tax Department said that the amended India-Mauritius protocol on the double taxation avoidance agreement (DTAA) is awaiting ratification and notification by the department.

What’s in Today’s Article?

• What is DTAA Between India and Mauritius?
• Significance of the DTAA Between India and Mauritius
• What is the Amendment to the DTAA Between India and Mauritius?
• Need to Amend the India-Mauritius DTAA 

What is DTAA Between India and Mauritius?

• In 1983, the Government of India and the Government of Mauritius came to a unanimous decision regarding the avoidance of double taxation called the DTAA.
• Following is a list of benefits that residents of both the contracting states will get:
  • It offers relief by exempting tax on income in the resident country that residents earn in another nation.
  • Lower withholding tax rates for taxpayers, so they have to pay lower TDS on incomes like interest, dividends, and royalties in India.
  • This agreement ensures that contracting states follow specific rules to apply taxes on the international income of residents of contracting states.
  • This agreement offers an anti-abuse provision that ensures that the benefits of this convention are only applicable to genuine residents of both countries.
  • In some cases, residents of contracting nations get tax at concessions rates.
  • This agreement ultimately makes both countries attractive for investment by offering a chance to avoid double taxation along with other tax benefits.
• In short, taxpayers can get multiple benefits under the DTAA, and the agreement will help prevent financial evasion in regard to income earned and capital gains.

Significance of the DTAA Between India and Mauritius:

• The DTAA was a major reason for a large number of foreign portfolio investors (FPI) and foreign entities to route their investments in India through Mauritius.
• Mauritius remains India’s 4th largest source of Foreign Portfolio Investments (FPI), after the US, Singapore and Luxembourg.
• FPI investment from Mauritius stood at Rs 4.19 lakh crore at the end of March 2024, which is 6% of the total FPI investment of Rs 69.54 lakh crore in India.

What is the Amendment to the DTAA Between India and Mauritius?

• Recently, in March2024, India and Mauritius signed an amendment to the DTAA (at Port Louis), introducing a principal purpose test (PPT)aimed at curtailing tax avoidance.
• The PPT will deny treaty benefits, such as the reduction of withholding tax on interest royalties and dividends, where it is established that obtaining that treaty benefit is one of the principal purposes for the party engaged in the transaction.
  • It ensures that treaty benefits are granted only for transactions with a genuine purpose.
• After the amendment, any Indian inbound or outbound cross-border structuring of investment routed through Mauritius should factor in the BEPS MLI.
  • BEPS MLI stands for Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
• This amendment applies to all incomes such as capital gains, dividends, fee for technical services, etc.

Need to Amend the India-Mauritius DTAA:

• Mauritius has been a preferred jurisdiction for investments in India due to the non-taxability of capital gains from the sale of shares in Indian companies until 2016.
• The treaty was last amended in 2016 allowing the right to tax capital gains arising from sale or transfer of shares of an Indian company acquired by a Mauritian tax resident.
• The earlier objective of ‘mutual trade and investment’ has now been replaced with an intent to “eliminate double taxation”.
  • This will be done without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance including through “treaty shopping arrangements”.

Q.1. What is Base erosion and profit shifting (BEPS)?

BEPS refers to corporate tax planning strategies used by multinationals to "shift" profits from higher to lower or no-tax locations, thus "eroding" the "tax-base" of the higher-tax jurisdictions using deductible payments such as interest or royalties.

Q.2. What is the Foreign Portfolio Investment (FPI)?

FPI consists of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company's assets and is relatively liquid depending on the volatility of the market.

Source: India, Mauritius revise tax treaty, aim to plug evasion

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What’s in today’s article?

● Why in News?

● What is Mount Etna?

● What are Volcanic vortex rings?

● Does producing volcano rings mean Etna is about to erupt very soon?

Why in News?

Mount Etna, the largest volcano in Europe, and among the world’s most active and iconic volcanoes, has been sending up almost perfect rings of smoke into the air. The rings are a rare phenomenon that scientists refer to as volcanic vortex rings.

What is Mount Etna?

• About
  • Mount Etna is an active stratovolcano on the east coast of Sicily, Italy.
  • It is Europe’s most active volcano and one of the largest in the world. Its recorded volcanic activity dates back to 1500 B.C.
  • Since then, it has erupted more than 200 times.
  • Etna has displayed a variety of eruption styles, including violent explosions and voluminous lava flows.
• Features of Etna
  • Etna’s summit has five craters, which are responsible for most of the volcano’s eruptions.
  • Etna has been a World Heritage Site since 2013, and according to UNESCO, the volcano’s eruptive history can be traced back 500,000 years.
• Other volcanoes erupt for much longer than Etna
  • One of the most famous long-term eruptions was Kilauea volcano on Hawaii.
• Its spewing spree in 1983 continued — almost nonstop — for 35 years until 2018, only to start again in 2021. The eruption is still ongoing.
  • Dukono in Indonesia started erupting in August 1933 and is still continuing.
  • Santa Maria in Guatemala began erupting in June 1922 and continues to this day.
  • Yasur in Vanuatu first rumbled to life in about 1270 (± 110 years) and as of June 2023, was still erupting.

What are Volcanic vortex rings?

• About
  • Vortex rings are generated when gas, predominantly water vapour, is released rapidly through a vent in the crater.
  • The vent that has opened up in Etna’s crater is almost perfectly circular, so the rings that have been seen above the mountain since recently are also circular.
  • The rings are produced by the explosion of gas bubbles within a narrow conduit, which shoots the gas at high speed toward the surface.
• Attrition along the conduit walls slows the movement of the gas jet, relative to the center of the conduit.
• Examples
  • Volcanic vortex rings have been observed at volcanoes such as:
    • Redoubt in Alaska,
    • Tungurahua in Ecuador,
    • Pacaya in Guatemala,
    • Eyjafjallajökull and Hekla in Iceland,
    • Stromboli in Italy,
    • Aso and Sakurajima in Japan,
    • Yasur in Vanuatu,
    • Whakaari in New Zealand, and
    • Momotombo in Nicaragua.

Does producing volcano rings mean Etna is about to erupt very soon?

• Volcanologists do not believe so. As per them, this event signifies that the activity from the new vent was slowing down.
• They claim that this can stop because the properties of the conduit that allowed for the formation of these volcanic vortex rings can change, maybe with obstructions.

Q.1. What is UNESCO?

UNESCO stands for United Nations Educational, Scientific and Cultural Organization. It was established on November 16, 1945, and its headquarters are located at 7, place de Fontenoy in Paris.

Q.2. What is stratovolcano?

A stratovolcano, also known as a composite volcano, is a type of volcano with a steep slope and a summit crater, made up of many layers of hardened lava, ash, and tephra. Stratovolcanoes form through explosive eruptions that deposit material near a central vent.

Source: A Sicilian volcano is blowing smoke rings in the sky. What are volcanic vortex rings?

What’s in today’s article?

• Background
• History of Swiss Mediation
• What are the Goals of the Summit?
• Russia’s Response to the Summit
• India’s Participation in the Summit

Background

• With the Russia-Ukraine war in its third year, Switzerland will host a peace conference on June 15-16, immediately after the G7 Summit in Italy.
• Switzerland has taken this initiative at the request of Ukraine’s President Volodymyr Zelenskyy, who visited Bern (Switzerland’s capital) earlier in January this year.

History of Swiss Mediation

• Neutrality is a foundational principle of Switzerland’s foreign policy.
• It has had a tradition of being the protecting power since the 19th century when it looked after the interests of both the Kingdom of Bavaria and the Grand Duchy of Baden during the Franco-Prussian War of 1870-71.
• It acted as the protecting power during the two World Wars, and held nearly 200 protective power mandates during World War II.
• Switzerland represented India’s interests in Pakistan and Pakistan’s in India between 1971 and 1976.
• Over the last two decades, Switzerland has been the protecting power between Saudi Arabia and Iran, the US and Iran, Russia and Georgian, and other pairs of mutually hostile governments.
• The country also has a history of hosting negotiations or mediating in conflicts. It hosted talks between the government in Colombo and the Liberation Tigers of Tamil Eelam in 2006.
• During the Russia-Ukraine war, however, Switzerland has leaned towards Ukraine, and has joined the Western sanctions regime against Russia.

What are the Goals of the Summit?

• During President Zelenskyy’s visit to Bern in January, 2024, Switzerland and Ukraine discussed the next steps towards a comprehensive, just and lasting peace in Ukraine.
• At Ukraine’s request, Switzerland agreed to host a high-level conference.
• The objective of the Summit is to “provide a platform for a high-level dialogue on ways to achieve a comprehensive, just and lasting peace for Ukraine based on international law and the UN Charter”.
• The conference will aim to “create a common understanding of the framework conductive to this goal and a concrete roadmap for the peace process”.
• Switzerland has invited 120 countries, including India, to participate in the conference.

Russia’s Response to the Summit

• Surprisingly, Russia has not been invited by Switzerland for the Ukraine-Russia Peace Summit.
• Russian President Vladimir Putin has said there will be no peace in Ukraine until Russia’s goals are met.
• He declared that Russia was not invited, and also stated that nothing could be decided without Moscow.
• He suggested that because there would be no Russian delegation at the conference, it could be claimed that Russia is refusing to negotiate.
• According to the Swiss foreign ministry, invitations to the June peace summit will be sent to around 120 countries in the coming weeks.
• Ignazio Cassis, head of the Swiss foreign ministry, had already stated that Russia would not be taking part.

India’s Participation in the Summit

• Prime Minister Narendra Modi’s schedule will be clear after the Lok Sabha results come in June 4.
• Once the election results are declared, the Prime Minister will be ready to travel, after the formation of the government.
• This would be the Indian Prime Minister’s first trip overseas after elections.
• Also, there are expectations that Italy will invite the PM for the G7 leaders’ summit as a guest — as has been the practice in the last five years since France invited New Delhi in 2019 and Japan in 2023.
• After the G7 leaders’ summit, the stop at the peace conference will be a “natural event” to go to for the Prime Minister.
• Zelenskyy had sought India’s support on his 10-point “peace formula”, which calls for withdrawal of Russian troops from Ukraine, release of prisoners, restoration of Ukraine’s territorial integrity, and guarantees on nuclear safety, food and energy security.

India has sought to maintain a diplomatic balancing act between Russia and Ukraine, and it will have to calibrate its response over attendance at the peace conference.

What’s in today’s article?

● Why in News?

● What is Index of Industrial Production (IIP)?

● What is Consumer Price Index (CPI)?

● Retail Inflation for March 2024

● Growth in the IIP for February 2024

Why in News?

Growth in India's industrial output accelerated to 5.7 percent in February, according to data released by the Ministry of Statistics and Programme Implementation.

Also, India’s consumer price index (CPI)-based inflation rate eased to 4.85% in March from 5.09% in February. However, it remained well above the Reserve Bank of India’s (RBI’s) 4 per cent target.

What is Index of Industrial Production (IIP)?

• About
  • The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.
  • There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
  • It is currently calculated using 2011-2012 as the base year.
• Institution involved
  • National Statistical Organisation (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI) releases the IIP data.
• IIP Index Components
  • IIP is a composite indicator that measures the growth rate of industry groups classified under:
• Broad sectors, namely, Mining (14.4%), Manufacturing (77.6%) and Electricity (8%)
• Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods etc.
  • These Eight Core Industries mentioned in above section comprise 40.27 percent of the weight of items included in the IIP.

What is Consumer Price Index (CPI)?

• CPI is a metric that measures retail inflation by collecting data on the prices of goods and services that are consumed by the retail population of the country.
• The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation releases CPI.
  • CPI is released for all-India and States/UTs separately for rural, urban and combined (national).
• Currently, CPI is calculated using 2012 as a base year.
• Items for the CPI basket of goods and services classified across categories.
  • Few of the categories are; food and beverages, clothing, housing, fuel and light, recreation and etc.
• All categories are assigned weights (as shown in the diagram).
  • Currently, CPI is calculated by taking into consideration 299 items.

Retail Inflation for March 2024

• India’s retail inflation rate eased to a 10-month low in March 2024. This fall was led by fuel and light group (-3.24 per cent), reflecting a decline in cooking gas prices.
• Food and beverages inflation remained elevated, easing only marginally to 7.7 per cent in March from 7.8 per cent in February.
• However, core inflation, which excludes volatile food and fuel items, continued to decelerate in March to 3.25 per cent.

Growth in the IIP for February 2024

• Growth in the IIP expanded to 5.7 per cent in February 2024.
• It was boosted by output growth in mining (8 per cent) and electricity (7.5 per cent) while manufacturing output (5 per cent) remained the laggard.
• In terms of the use-based classification of goods, production growth in February was as follows:
  • Capital goods increased at 1.2 percent;
  • Intermediate goods increased at 9.5 percent;
  • Infrastructure goods rose to 8.5 percent;
  • Consumer durable rose to 12.3 percent;
  • Consumer non-durable goods fell to 3.8 percent

Q.1. What is National Statistical Organization (NSO)?

The National Statistical Organization (NSO) is a government organization that was formed in 2019 by merging the Central Statistics Office (CSO) and the National Sample Survey Office (NSSO). The NSO is part of the Ministry of Statistics and Programme Implementation (MOSPI).

Q.2. What is core inflation?

Core inflation is a measure of long-term price trends that excludes volatile price changes, such as food and energy. It is derived from headline inflation and is measured by excluding food and fuel from the Consumer Price Index (CPI) or Wholesale Price Index (WPI).

Source: India's February IIP grows at 5.7% from 3.8% a month back

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