THE HINDU – CURRENT NOTE 18 APRIL
SC raps States on massive police vacancies
Summons officials for recruitment
•The Supreme Court on Monday sought the personal appearance of home secretaries or authorised joint secretaries of six States together with a definite roadmap to fill up the long-pending vacancies in the States’ police forces.
•"We have been persuading you (States) to fill the vacancies since 2013, but you are not doing anything,” a Bench led by Chief Justice J.S. Khehar observed orally.
•The court found that Uttar Pradesh has 1.51 lakh vacancies, West Bengal with 37,325, Karnataka has 24,899, Jharkhand 26,303, Bihar 34,500 and Tamil Nadu has 19,803 posts vacant.
TN also pulled-up
•Tamil Nadu informed the court that advertisements have been put out for the vacancies.
•"Giving advertisements is the first step. You (Tamil Nadu) have taken the first step since 2013,” the Bench remarked.
•"We therefore, hereby, direct the home secretaries of six States to assist this court personally or nominate an officer, not below the rank of joint secretary, and provide a definite roadmap for filling up of vacancies," the court said in a short order.
•The apex court fixed the next hearing on the plea filed by Manish Kumar for April 21.
•The apex court was hearing the 2013 petition which claimed that law and order situation in the country was deteriorating due to a large number of vacancies in police services at all levels across States.
700 medicines made affordable for poor: PM
‘We’ll ensure that doctors prescribe only generic medicines’
•Prime Minister Narendra Modi on Monday said the Central government had fixed prices for 700 medicines for the benefit of the people as part of a comprehensive healthcare policy.
•Inaugurating a ₹500-crore multi-speciality hospital set up by the diamond merchants of Surat, he said the government would make sure that the doctors prescribed only generic medicines.
•“This will break the monopoly of big medicine outlets,” he added.
•“For the benefit of poor people, the government has fixed the prices for as many as 700 medicines so as to ensure that they can afford it,” he said.
•Mr. Modi said his government rightly understood the value of a healthy society and had been working tirelessly towards building one, and after a long gap of 15 years that it was his government that had come up with a good healthcare policy.
•He added the government had given much required attention to preventive healthcare measures through the Swachh Bharat mission, which is a part of promoting preventive healthcare habits.
Setting an example
•He commended the people of Surat for adopting the habit of cleanliness in such a way that it could provide a good example for other cities to emulate.
•Referring to the ₹500-crore Kiran Hospital that he inaugurated, Mr. Modi said that more than the price paid for setting up such projects, the hard work that went behind it was important.
•“Whether the medical facility is worth ₹500 crore or ₹5,000 crore, it is the family values and diligent efforts that have ultimately anointed it as a blessing for public,” he opined.
Plastic bullets to replace pellets in J&K
Govt. exploring options to initiate talks
•The Union Home Ministry said on Monday it would introduce less lethal “plastic bullets” to be used against protesters in Jammu and Kashmir.
•The Centre said it was exploring options to initiate a dialogue in Kashmir, including with the separatists, but no one had came forward in the past and it had hit a dead end.
•The government also said it was considering enhanced use of “bunkers” to protect security forces from stone throwers after the annual shift of the capital from Jammu to Srinagar in the next few days.
•A senior government official said the government had managed to control the spiral of violence but the “atmosphere was vitiated” because of the April 9 byelections in the Srinagar Lok Sabha constituency.
•A 26-year-old man was tied to the front of an Army jeep used as a human shield against stone throwers in Budgam district of Kashmir on April 9A video of this has sparked outrage and the local police have registered a case.
•On Monday, Home Minister Rajnath Singh met officials to discuss the security situation in Kashmir.
•Another official alleged that the “human shield” video was posted by someone in Pakistan.
SC refers anti-defection law issue to larger Bench
Plea urges second look on status of expelled legislator with regard to Tenth Schedule
•Will the anti-defection law apply to expelled members of either Houses of Parliament or Legislative Assemblies?
•Twenty-one years ago, the Supreme Court had concluded in G. Viswanathan versus Hon’ble Speaker, Tamil Nadu Legislative Assembly that a legislator expelled from his party shall be deemed to have “voluntarily given up” his membership of that party who got him elected and nominated him to the House. This legal fiction of deeming him to continue in the party post-election as an “unattached member” makes him therefore vulnerable to disqualification from the House on the ground of defection under the Tenth Schedule (anti-defection law) of the Constitution.
Still susceptible
•Under the Viswanathan judgment, the expelled legislator would still be susceptible to the “whims and fancies” of the leaders of the party which threw him out despite the fact that subsequently, after his expulsion, he had gone ahead and formed his own political party.
•In August 2016, the Supreme Court refrained from adjudicating the constitutional question in expelled Samajwadi Party leaders Amar Singh and Jaya Pradha’s case. The court had then found the issue ‘infructuous’ as both leaders had by that time completed their tenure in Parliament.
•But Mr. Singh, whose political career has come a full circle with his re-induction into the Samajwadi Party and has a tenure in Parliament till July 2022, returned to the Supreme Court. He asked the court to take a second look at the question of status of an expelled legislator with regards to the Tenth Schedule and lay down the law.
•Mr. Singh, represented by senior advocate C.U. Singh, contended that the application of Tenth Schedule to an expelled legislator is violative of the Basic Structure of the Constitution.
•Picking up from where it dropped the case last year in August, a Supreme Court Bench of Justices Dipak Misra and A.M. Khanwilkar on Monday agreed to refer Mr. Singh’s petition to a an “appropriate larger Bench.”
Question still alive
•Justice Misra’s Bench observed in a seven-page order that the fate of expelled legislators and the Sword of Damocles that hangs over them “remains to be dealt with as the same has not been answered with the efflux of time... the question remains alive today.”
•At the centre of the controversy is the Supreme Court’s interpretation of paragraph 2(1) of the Tenth Schedule in the Viswanathan judgment of 1996. The court held that even if a member was thrown out or expelled from the party, for the purposes of the Tenth Schedule he would not cease to be a member of the political party that had set him up as a candidate for the election. He would continue to belong to that political party even if he was treated as “unattached.” The court had held that the act of voluntarily giving up the membership of the political party may be either “express or implied.”
•“When a person who has been thrown out or expelled from the party which set him up as as a candidate and got elected, joins another [new] party, it will certainly amount to his voluntarily giving up the membership of the political party which had set him up as a candidate for election as such member,” the Viswanathan judgment had held.
Why the Jayalalithaa case matters
By dismissing Karnataka’s review petition, the Supreme Court might have struck a blow against public interest
•The late Chief Minister J. Jayalalithaa’s 20-year-old Disproportionate Assets (DA) case is no ordinary one. Its ramifications, legally, in the country are wide-ranging and severe. A case regarding acquisition of disproportionate assets by a public servant, under the Prevention of Corruption Act, stands on a slightly different footing from an ordinary criminal case. In the case of possessing disproportionate assets, the allegation is that a public servant amasses wealth by illegal means and the object of law is not merely to punish the offender but also to see that the offender or his/her legal representatives do not own or enjoy such illegally acquired assets.
•The Chief Minister passed away on December 5, 2016. Orders in the DA case had been reserved six months prior to this, after all hearings had concluded on June 7, 2016. On February 14, the Supreme Court upheld the ‘guilty’ verdict of the Bengaluru trial court, sending the other three accused — V.K. Sasikala, J. Ilavarasi and V.N. Sudhakaran — to jail, with a penalty of Rs. 10 crore each. The first accused, Jayalalithaa, was no more and hence the court held that the charges against her had abated.
•On March 21, the State of Karnataka filed a review petition challenging that part of the order which held that the case against Jayalalithaa had abated. Our argument was that when the death of the accused takes place long after the arguments are concluded but before a judgment is pronounced, there will be no question of abatement of appeal.
•But the Supreme Court, by dismissing on April 5 the review petition filed by the State of Karnataka, missed an opportunity to settle this issue. Consequentially, what the highest court of the country has done is to set a bad precedent in helping corrupt public servants.
•Take the instance of an accused public servant choosing to commit suicide after acquiring huge property by illegal means. Legal representatives or heirs of the accused, according to the Supreme Court, can later enjoy the benefits of the illegally accrued wealth and property left behind, as the case against the accused public servant abates. This is a retrograde step in the march towards eradication of corruption in public life.
The question of abatement
•Apart from the question as to whether a criminal appeal filed with leave under Article 136 of the Constitution of India will ever abate on the death of the accused, this particular case raised other equally important questions regarding alleged abatement where death has taken place after conclusion of the arguments and the judgment was reserved.
•It is settled law that there is no hiatus (a break or a gap) between the date of conclusion of arguments and the date on which the judgment is ultimately delivered. A judgment is expected to be pronounced immediately after the conclusion of the arguments and pronouncing the judgment on a later date is only for the convenience of the court. Any event occurring between the date the judgment is reserved and the actual date it was delivered on could not have any effect on the judgment which is ultimately pronounced.
•Order XXII Rule 6 of the Code of Civil Procedure in unambiguous terms states that there will be no abatement of an appeal if the death is after judgment is reserved. It further clarifies that such judgment pronounced shall have the same force and effect as if the judgment was delivered on the date on which the arguments were concluded.
•The Supreme Court itself has constitutionally applied this rule in quite a few civil appeals by holding that there is no abatement of appeal where the death is after the judgment was reserved. The Supreme Court rules also provide that in the case of an election petition, the proceedings will not abate on the death of a candidate if death is after judgment is reserved once arguments are concluded.
•There is no principle or authority which can be pressed into service to hold that a different view is possible in the case of a criminal appeal. The Supreme Court, in clear terms, held that the provisions of the Code of Criminal Procedure are not applicable to the appeals filed before the Supreme Court, by applying for Special Leave under Article 136 of the Constitution, though for the purpose of uniformity principles therein can be applied in suitable cases. The Supreme Court rules also do not provide for abatement of any criminal appeal. It can therefore be safely concluded that there is no constitutional or statutory provision providing for abatement of appeal, especially in a case where death has taken place after the judgment is reserved.
•The abrupt conclusion of the Supreme Court that the appeal against Jayalalithaa has abated ignores the above said principle of law. It is also relevant to note that the case was never posted for further hearing after the death of the accused.
•When judgment was pronounced on February 14, the court stated that the case against Jayalalithaa had abated, without any discussion on the questions involved. This finding was recorded without hearing the parties. Under the circumstances, it would have been appropriate for the Supreme Court to at least afford an opportunity to the parties to address arguments on this question and take a suitable decision. However, the court dismissed the review petition on merits, rejecting the request for oral hearing.
•The legal implications arising out of the death of the accused after the judgment is reserved was not debated but the dismissal was recorded based on an erroneous view of law. The principle of sub silentio (action taken without notice, in legal terms) is thus applicable to the facts of the present case.
Reasons for review petition
•In a section of the media an erroneous impression has been created that the State of Karnataka, in its greed to collect the fine amount of Rs. 100 crore imposed on Jayalalithaa by the trial court, has filed the review petition. The DA case was originally filed by the State of Tamil Nadu and Karnataka had to step into the case only after the direction of the Supreme Court, which transferred the case on a finding that the process of justice was being subverted in Tamil Nadu as the main accused held the post of Chief Minister of the State at the time.
•The Supreme Court declared that the State of Karnataka is sole prosecuting agency in the case. It is only in obedience of the order of the Supreme Court that Karnataka has performed its role as sole prosecuting agency, so that there was a fair trial of the case. The State of Karnataka has no individual interest in the matter. The fine amount collected as also the confiscated assets could only benefit Tamil Nadu. Karnataka is not a beneficiary.
•The right of the State of Karnataka is only for reimbursement of the expenses incurred in connection with the litigation (legal expenses) as ordered by the Supreme Court. Karnataka filed the review petition as it felt that an important question of law has been erroneously decided. It has chosen to do so only to fulfil its constitutional obligations. Now that the review petition has been dismissed, the case has ultimately reached its logical end. Karnataka can have the satisfaction of knowing that it has effectively performed the obligations imposed on it by the Supreme Court.
•B.V. Acharya served as special public prosecutor and special counsel in the disproportionate assets case involving the late Tamil Nadu Chief Minister Jayalalithaa and AIADMK general secretary V.K. Sasikala
Legally enabling
The HIV/AIDS Bill provides a solid base for further empowerment and treatment access
• The HIV and AIDS (Prevention and Control) Bill passed by Parliament does not guarantee access to anti-retroviral drugs and treatment for opportunistic infections, but there is no denying that it is a good base for an active health rights movement to build upon. Understandably, HIV-positive people in the country, estimated at over 21 lakh, are disappointed that the Centre’s commitment to take all measures necessary to prevent the spread of HIV or AIDS is not reflected in the Bill, in the form of the right to treatment. The law only enjoins the States to provide access “as far as possible”. Beyond this flaw, though, the legislation empowers those who have contracted the infection in a variety of ways: such as protecting against discrimination in employment, education, health-care services, getting insurance and renting property. It is now for the States to show strong political commitment, and appoint one or more ombudsmen to go into complaints of violations and submit reports as mandated by the law. Here again, State rules should prescribe a reasonable time limit for inquiries into complaints, something highlighted by the Standing Committee on Health and Family Welfare that scrutinised the legislation.
• Access to insurance for persons with HIV is an important part of the Bill, and is best handled by the government. The numbers are not extraordinarily large and new cases are on the decline, according to the Health Ministry. Data for 2015 published by the Ministry show that two-thirds of HIV-positive cases are confined to seven States, while three others have more than one lakh cases each. Viewed against the national commitment to Goal 3 of the UN Sustainable Development Goals — to “end the epidemic of AIDS” (among others) by 2030 — a rapid scaling up of interventions to prevent new cases and to offer free universal treatment is critical. Publicly funded insurance can easily bring this subset of care-seekers into the overall risk pool. Such a measure is also necessary to make the forward-looking provisions in the new law meaningful, and to provide opportunities for education, skill-building and employment. As a public health concern, HIV/AIDS has a history of active community involvement in policymaking, and a highly visible leadership in the West. It would be appropriate for the Centre to initiate active public consultations to draw up the many guidelines to govern the operation of the law. Evidently, the requirement for the ombudsman to make public the periodic reports on compliance will exert pressure on States to meet their obligations. In an encouraging sign, the Supreme Court has ruled against patent extensions on frivolous grounds, putting the generic drugs industry, so crucial for HIV treatment, on a firm footing. The HIV and AIDS Bill may not be the answer to every need, but it would be a folly not to see its potential to make further gains.
The great climate churn
Regional and global planning is essential to combat extreme events
•In recent months, unprecedented rates of glacier melts have been reported both in the Antarctic and the Arctic. “A massive crack in Antarctica’s fourth-biggest ice shelf has surged forward by at least 10 kilometres since early January,” saidNature magazine in a recent article. Glaciers cover the terrain in both these regions, which have the only permanent ice sheets that still exist on earth today.
•The earth has enjoyed a more or less stable temperature for the last 10,000 years. Prior to that there were several ice ages and periods of warmer temperature, also known as inter-glacials. The ice ages are believed to have been caused by small shifts in the earth’s orbit, but all the reasons for the temperature fluctuations observed are not yet entirely understood.
•About 5.3 to 2.6 million years ago, during the Pliocene epoch, global sea levels were close to 30 metres higher than they are today, while average global temperatures were only about three to four degrees Celsius warmer. What could happen in the current century, as a result of anthropogenic climatic change, remains a matter of great interest within the scientific and policymaking community.
The melting Antarctic
•The Antarctic ice sheet is 14 million sq km in area and holds a large amount of frozen fresh water. (In comparison, the area of India’s land mass is about 1.3 million sq km.) If all the ice over the Antarctic were to melt, sea levels would rise by about 60 metres. Parts of the ice sheet also flow into the ocean and do so through ice shelves that protrude into the water. Several media reports over the last few months have covered the expanding rift or crack along the Larsen C shelf in the Antarctic, which is expected to break off at any time. Larsen A and B collapsed in 1995 and 2002 respectively. Normally, ice shelves lose mass by the breaking off, or calving, of some of the portions and also by melting.
•When such large chunks break away from an ice shelf, they speed up the collapse of the entire shelf. Since this is attached to the rest of the glacier, these processes can increase the speed at which the glacier flows into the ocean. Thus, even though the Larsen C collapse by itself, since it is in the water, will not raise sea levels, it will hasten the melting of the glacier it is connected to.
•In 2014, Eric Rignot, principal scientist for the Radar Science and Engineering Section at NASA’s Jet Propulsion Laboratory, wrote that the retreat of ice in the Amundsen Sea sector of West Antarctica is inevitable, with major consequences for global sea levels. While the entire West Antarctic Ice Sheet (WAIS) may take a few hundred to a thousand years to completely melt, the process and the resultant collapse are now recognised as unstoppable.
Rising sea levels
•In the Arctic, if all the ice in the Greenland ice sheet were to melt, it would raise global sea levels by about 7 metres (or 23 feet). For the last several years, glaciologists have noticed that ice melt in the summer has increased and covers a larger area than previous years. Scientists now realise that a lot of the recent melt has been due to increasing surface melt, in addition to calving or breaking off of chunks of ice.
•Experts have known that there are feedback mechanisms that speed up glacier melt; exactly what these processes are and the rate by which they accelerate the melting remains an area of research. Soot and dust carried by air from various places, bacteria and algal pigments in the meltwater, any other pigments in the glacier can all reduce the reflection of the sunlight, thus increasing the absorption of heat energy by the ice. This consequently increases ice melt, which then absorbs more solar radiation, thus accelerating a feedback process. The meltwater flows into deep shafts, or moulins, that then speed up the flow of the glacier.
•But there are also other phenomena that seem to have an influence on glacier melt. Temperatures in Northern Greenland have been much warmer and in fact, surface melt has doubled Greenland’s contribution to sea level rise over the period 1992-2011 to 0.74 mm per year. Carbon dioxide concentrations have crossed 400 ppm in the atmosphere and are the highest they have been in the past 4,00,000 years.
•Modelling glacier melt is very complex as it is affected by the temperature of the water, ocean currents and other factors still not entirely understood, along with various positive feedback mechanisms that can speed up the melting. The well-known climatologist James Hansen and his colleagues published a paper last year suggesting that sea level rise is a non-linear process and given what happened to sea levels in past geological periods, we should prepare for a rise of several metres over the next 50-150 years. This would imply that many of those alive today would likely see substantial increases in their lifetimes.
Global response needed
•The global community is well aware that many large and densely populated cities are located along the coast and in low-lying deltas. Protecting the coast is an expensive undertaking and even then dikes, sea walls and similar structures provide only partial protection, based on studies undertaken by the Dutch Delta Committee and others. For India, the east coast, especially certain low-lying districts, are extremely vulnerable to intensive storms, which then lead to flooding, salt-water intrusion, and loss of land and livelihoods. On the west coast, while there are generally fewer storms, the concern is coastal erosion and flooding from sea level rise. The discussion regarding sea level rise and potential coastal impacts needs also to be understood not just as a coastal phenomenon, but also as an issue that ripples through the entire economy. Flooding in Chennai two years back did not affect just the land, but went through the economy as a whole and Swiss Re, the reinsurance company, has estimated losses to the economy due to the floods to be $2.2 billion.
•Thus, enforcing the coastal regulation zone, protecting vulnerable districts and the most vulnerable communities which rely on ecosystems and the sea for their livelihoods are areas that need strengthening. Regional agreements related to refugees from climate effects need to be initiated. As a country which has generally been open to refugees from Tibet, Nepal, Afghanistan, Bangladesh and Sri Lanka, initiating and taking forward the conversation on regional planning for extreme events such as sea level rise would be important for India, the largest country in the region.
Redefining citizenship
The absence of a constitutional right to vote has consequences
•In March, the Supreme Court requested the government’s views on a PIL seeking to impose a lifetime ban on contesting elections for those sentenced to imprisonment for more than two years. Currently, the ban extends to six years after the completion of a sentence. The proposed change, which is supported by the Election Commission, would effectively end the electoral career of many prominent political leaders.
•This case could be the latest amongst a series of Supreme Court decisions modifying the electoral process in recent years: the court has held that citizens are entitled to cast a ‘none of the above’ vote, that prisoners are disqualified from standing for election during periods of incarceration, that the concealment of criminal antecedents constitutes a corrupt practice under the law, and that electoral appeals to caste and religion are impermissible.
•Around the turn of the century, the court increasingly began making decisions addressing the ‘criminalisation of politics’. Early decisions focussed on disclosure and transparent process — ensuring, for instance, that candidates declared assets and liabilities, educational qualifications, and criminal antecedents. Yet, it was left to the wisdom of the electorate to decide whom to vote for. Similarly, parties were tasked with determining whether it would be appropriate to field candidates with criminal antecedents.
Disquieting developments
•More recently, however, the court has gone further; it has attempted to gradually reshape the ballot. At first glance, these come across as welcome developments — after all, who could fault the court for preventing prisoners or those with criminal records from contesting elections? Yet, they raise fundamental questions about the nature of our democracy, and are deeply disquieting for a number of reasons.
•First, the court has increasingly used the regrettable, caste-based taxonomy of ‘purity’ and ‘pollution’ in its decisions. For example, in 2013, it endorsed the decision of the Patna High Court observing that candidates with criminal records pollute the electoral process, affect the sanctity of elections and taint democracy. The court’s language is symptomatic of its conception of its own role — as a sentinel of democracy seeking to ‘disinfect’ the electoral process. This is more than a poor choice of words. The court has the power to frame debate and influence the language of argument in ways that perhaps no other institution does.
•Second, the court’s recent decisions have meant that whether the right to vote is a constitutional right or merely a statutory privilege is still a matter of contestation. Article 326 of the Constitution provides for universal adult suffrage, but does not specifically mention the right to vote. Rights that are not explicitly set out in the Constitution, such as the right to privacy, have routinely been impliedly read into the text. But the court has refused to categorically recognise the right to vote as an inalienable constitutional right, frequently holding that it is a privilege that can be taken away as easily as it is granted.
•It is disconcerting that the court still does not clearly acknowledge a constitutional right to vote. Participation in the electoral process is often seen as a gateway right, or a ‘right of rights’. Our only response to citizens whose candidate of choice has not been elected is to point towards their right to exercise that choice in the first place. The absence of a constitutional right to vote has real consequences, for it makes it easier to impose wide restrictions on who can exercise that right, and the circumstances in which they may do so.
•Closely tied to this refusal to clearly recognise a constitutional right to vote is the court’s endorsement of the embargo on the voting rights of prisoners. Blanket prohibitions on voting are the surest way of alienating a political community. The embargo is particularly draconian, for all prisoners, regardless of the seriousness of their offences or the length of their sentences, are denied the vote. Moreover, prisoners awaiting trial are also denied this ‘privilege’.
•It is one thing for the court to introduce transparency-promoting measures with a view to allowing change to take place organically, but quite another to change the rules of the game to match its conception of the ideal electoral system. The right to vote and the right to contest elections are fundamental markers of citizenship in a constitutional democracy. Incrementally yet decisively, the court is changing what it means to be a citizen of this country. It may soon take another step in that perilous direction.
Cyber response unit to be set up, says Reserve Bank
Move comes in the wake of attacks in the financial system
•The Sub-Committee of the Financial Stability and Development Council (FSDC), which met on Monday, discussed the setting up of a Computer Emergency Response Team for the Financial Sector (CERT-Fin), the Reserve Bank of India (RBI) said.
•“Issues such as setting up of Computer Emergency Response Team for the Financial Sector (CERT-Fin), roadmap for National Centre for Financial Education (NCFE) and macro-prudential framework in India were also discussed,” the RBI said. The sub-committee reviewed the major developments on the global and domestic fronts that impinge on the financial stability of the country.
•Apart from the RBI governor and deputy governors, Ajay Tyagi, Chairman, Securities and Exchange Board of India (SEBI), T. S. Vijayan, Chairman, Insurance Regulatory and Development Authority of India (IRDAI), Hemant Contractor, Chairman, Pension Funds Regulatory and Development Authority (PFRDA), and finance ministry representatives were present in the meeting.
•The move to set up an emergency response team comes in the backdrop of growing cyberattacks in the financial system. RBI had already created a specialised cell (C-SITE) within its supervision department to conduct detailed IT examination of banks’ cybersecurity preparedness, to identify the gaps and to monitor the progress of remedial measures. More than 30 major banks were to be covered by the detailed IT examination in 2016-17 and all banks are to be covered by 2017-18.
‘No need for borrowing freeze’
Government may borrow if it follows fiscal deficit path, says FRBM panel chief
The demonetisation of high-value currency notes could be considered a far-reaching structural reform that triggers an escape clause from fiscal consolidation goals, as per the new fiscal management framework proposed by a high-level panel, said its chairman N.K. Singh. The four-volume report of the committee to review the Fiscal Responsibility and Budget Management (FRBM) Act has suggested the creation of a new Fiscal Council and a focus on public debt to GDP ratio. Edited excerpts from an interview:
You have sought a shift in focus to the debt to GDP ratio instead of just deficit percentages and the target of 60% debt to GDP by 2023 from the present level of about 68%. Are you effectively recommending a borrowing freeze?
• First of all, if we do move in the direction of second-generation fiscal rules that advanced countries or successful emerging markets are following, this is the kind of a macro-economic fiscal anchor supported by operational fiscal deficit targets they are following.
• This is something the rating agencies had also pointed out as an important ingredient, in considering any improvement in the country’s rating, during their presentations to us. So yes, it is true that we are recommending a reduction in the current debt to GDP number. But we believe that there is no need for a freeze on borrowing if the fiscal deficit path is followed in accordance to the plan we have proposed.
• Of course, your question is important as we have to be concerned about the debt to GDP rate of state governments, because states will have to be equal partners. The most preferred entity for examining the issue of States’ debt should be the 15th Finance Commission and in fact, one of our recommendations is that its terms of reference should require a look at the issue of state debt — not only the overall level, but the distribution of debt across states and their capacities. State finances need equal attention.
• If we do achieve these targets by 2023, what kind of impact do we expect on our global ratings?
• Credit rating is a complex thing that is for credit rating agencies to decide. We must be guided by what we consider is the most beneficial route for macro-economic stability.
• Now, the coupling of states in the fiscal framework with a clear monetary policy framework would be a very powerful signal for the international community. Rating agencies also would like to see such a public debt anchor.
• We have preferred a rule-based architecture, not a discretionary regime.
• That is why we have suggested the repeal of the present FRBM law and a new legislation called Debt and Fiscal Responsibility Act.
• A rules-based framework seems to work across countries better than discretionary ones which may be liable to somewhat indiscriminate deviations.
• We have found wherever a range of deficits is allowed, countries go to the top of the range.
• Suppose we suggested 3%-4%, then more countries will operate at 4% than 3%. Most of us felt a fixed number would be better, and we recognised circumstances under which the government can deviate through the mechanism of escape clauses. So a degree of flexibility has been suggested.
One of the triggers for the escape clause, you have said, should be far-reaching structural reform with unanticipated fiscal implications. With the benefit of hindsight, would demonetisation qualify as such a trigger in your opinion?
• That is for the government to interpret. Demonetisation certainly, by any reckoning, had far-reaching structural changes and its revenue consequences are also a bit uncertain. But that is for the government to examine. We have also said that the resort to escape clauses cannot be an automatic reaction. The Fiscal Council we have proposed would play an important role in judging and assessing the circumstances and the advice of the Council on the appropriateness of triggering the clause would be an important contributory factor. That firewalls the possibility of indiscriminate deviations that are not acceptable, if the government decides to constitute such a Council.
• The RBI governor seems to disagree on the extent of such flexibility, which you have said could be up to 0.5% of GDP…
• That’s a good point. The RBI governor preferred the total cap on the escape clauses to be 0.3% of GDP. His point was grounded in the fact that the deviation should be really minimal. On the other hand, the other committee members said that considering that the circumstances for deviations are so stringent and involve a wider disruption to the economy, the 0.5% number was more appropriate. That was the majority view even though we recorded that Dr. Urjit Patel preferred 0.3%. The circumstances include acts of war and natural disasters. So the quantum of the government’s response would need to be a fairly robust one.
• The Chief Economic Advisor Arvind Subramaniam has given a dissent note and mooted a focus on primary deficit instead of arbitrary debt targets…
• We have carried his dissent note and also included a detailed rejoinder in the report, so it presents the views of all members except Dr. Arvind Subramaniam. We felt it was neither a necessary nor sufficient condition to achieve the intended outcome. In fact, hardly any country is using that as a principal anchor.
How did you manage to make sure that the RBI governor’s difference of opinion didn’t turn into a dissent note?
• That’s a very difficult question. But let me say that the overall atmospherics of this committee was very consensual. Everyone had different points of view that we sought to accommodate. The RBI governor was content that his point was recorded and didn’t feel the need to put a dissent note. On the other hand, the CEA had such a different view on the overall architecture of the report so we accepted that there would be a note of dissent.
