📰 Yeddyurappa takes over, Congress calls him ‘one-day CM’: Karnataka political developments — As it happened
Yeddyurappa effects major shake-up in bureaucracy; Congress calls him ‘one-day Chief Minister’.
•The BJP's B.S. Yeddyurappa took oath as the Chief Minister of Karnataka on Thursday. This follows a rare all-night hearing by the Supreme Court, when it refused to stay or postpone the swearing-in. A late-night petition filed by the Congress-JD(S) challenged Governor Vajubhai Vala's decision to invite the BJP to form a government.
📰 The East Asian reset
After years of mistrust, China reaches out to Japan with high-level visits
•It appears to be the season for diplomatic resets in Asia. Would-be hegemon China is at the centre of this regional spring thaw. India is not the only rival with which Beijing has recently been trading pleasantries rather than threats. Usually fraught China-Japan ties are in the midst of an upswing as well.
Peace overture
•Last week, Chinese Premier Li Keqiang was in Japan on a three-day state visit, his first trip to Tokyo since taking office five years ago. It was also the first top-level bilateral visit after relations between the two countries plummeted in 2012 over a chain of disputed islands claimed by both sides.
•The melt in this years-long freeze has been evident for several months. One signal came last September when Prime Minister Shinzo Abe became the first Japanese leader in 15 years to attend the Chinese Embassy’s annual National Day celebrations in Tokyo. Since then, Mr. Abe and Mr. Xi have met on the sidelines of an Asia-Pacific Economic Cooperation summit in Vietnam.
•But the real “reset” began in more recent weeks with the resumption of a stalled high-level economic dialogue after an eight-year hiatus, which followed close on the heels of an April visit to Tokyo by China’s State Councillor and Foreign Minister Wang Yi. In early May, Mr. Abe spoke to Mr. Xi on the phone to discuss the unfolding events on the Korean peninsula, the first phone call ever between the two leaders. Talk of a possible trip to China by Mr. Abe later this year is rife. However, it would be sensible to hold back on the champagne just yet.
Why the tension?
•Japan and China have one of the most tense, yet economically intertwined relationships. Beijing believes Japan is yet to properly atone for its brutal invasion of China in the run-up to and during the Second World War. In the post-War alignment Japan has remained firmly tethered to the U.S., often putting it in an adversarial position vis-à-vis China. Perhaps the most challenging point of contention is the territorial dispute over the Diaoyu/Senkaku islands as they are known in China and Japan, respectively, in the East China Sea.
•Nonetheless, Japan was an important player in China’s economic rise, which saw the country’s transformation from an agrarian backwater to a global manufacturing powerhouse. According to the Japan External Trade Organisation, China-Japan trade stands at about $350 billion (by comparison, India-China trade is $84.44 billion).
•China has overtaken Japan as the world’s second largest economy and has also eclipsed it as a global geostrategic player. And the two countries continue to vie for influence in the region, with Southeast Asia in particular emerging as a theatre for this competition.
What has changed?
•So, what explains the ongoing thaw, which has seen Mr. Li chatting with Japanese emperor Akihito and gifting the archipelago a pair of crested ibises? According to Shin Kawashima, a China scholar at the University of Tokyo, there is a triumvirate of motivating factors on the Japanese side: an unpredictable U.S., North Korea and business interests.
•U.S. President Donald Trump’s America First policy and the tariffs he has slapped on some $60 billion worth of Chinese products have also impacted Japan, which despite its status as a U.S. ally, failed to get any exemption from new duties on steel and aluminium. This is only the latest example of the increasingly uncertain U.S. policy towards Japan and the wider region, which Prof. Shin describes as “fragile and vague”. The result is that Japan needs to keep ties with China on an even keel, at least until it can be more sure of the U.S.’s intentions.
•Mr. Abe is also hoping that China can use its influence with North Korea to highlight Japan’s concerns, at a time when Tokyo feels somewhat shut out of the flurry of diplomacy on the Korean peninsula. He is particularly worried that in the heat of rapprochement, allies like the U.S. will forget about the 12 Japanese citizens abducted by North Korea in the 1970s and '80s who still remain unaccounted for.
•And finally the many Japanese businesses invested in China, that have on occasion suffered punitive measures from Beijing, always welcome stronger bilateral ties.
•Conversely for China, the idea of Japan’s leader asking for support on North Korea plays well domestically as an example of Beijing’s international clout. Moreover, given the simmering possibility of a trade war with the U.S., better ties with economic heavyweight Japan are also in China’s interests. In addition, China is keen on getting Japan to play ball with its signature Belt and Road Initiative (BRI), something that Mr. Li stressed more than once during his visit last week.
•His efforts culminated in the establishment of a public-private council in Japan to discuss joint projects with China related to the BRI. Although initially reluctant to participate in the BRI, Tokyo has signalled that it is open to the initiative as long as proposed infrastructure projects meet the criteria of being “open, transparent, fair and economically feasible.” In this way Japan can keep on the right side of China without necessarily committing to participation. Similarly, the Japan-backed Asian Development Bank is exploring co-financing projects with the Beijing-led Asian Infrastructure Investment bank, even though Japan has formally steered clear of it.
•Yet, any China-Japan alignment is a tactical and provisional affair, rather than long-term and strategic, born out of the current moment in a fluid geopolitical landscape. It is more akin to a pause rather than a resolution of conflict. And as with the India-China reset, although it is temporarily beneficial to both sides, the foundation of the bilateral relationship remains troubled and treacherous.
📰 Arbitrary, capricious: on the Karnataka Governor's decision
The Governor has banked not so much on the count the BJP had, as on what it could engineer
•In summarily ignoring the claim of H.D. Kumaraswamy, Karnataka Governor Vajubhai Vala abandoned both propriety and common sense, acting in a politically partisan manner unbecoming of his office. Mr. Kumaraswamy was elected leader of the Janata Dal (Secular) Legislature Party and, with the declared support of the Congress, had the backing of a majority in the newly elected Assembly. The leader of the BJP Legislature Party, B.S. Yeddyurappa, offered no demonstrable proof of majority, but was invited to form the government, and given all of 15 days to prove he had the confidence of the House, solely on the basis of being the leader of the single largest party. Far from ushering in a stable government, the Governor unbolted the doors to allow room for the BJP to try to engineer defections. In situations such as these, the Constitution allows an element of discretion to the Governor, but this power was never meant to be used arbitrarily and capriciously. In defence of the Governor’s action, BJP leaders have cited the Bommai judgment, which ruled on the course open for the Governor in the event of a Chief Minister losing majority in the House, but offered no opinion on a post-poll situation, where it said the Governor had to “invite the leader of the party commanding majority in the House or the single largest party/group to form the government.” Nothing in the judgment privileges the single largest party over the largest group when it comes to being given the first shot at forming a government.
•The BJP leaders have now staked out positions that are at odds with those they adopted after the Assembly elections in Manipur and Goa, when the single largest party, the Congress, was denied a chance to form the government. Union Law Minister Ravi Shankar Prasad had a weak defence on this turnaround: the Congress, he claimed, had not staked a claim in those two States. The Congress has taken the fight to the Supreme Court, which has asked the Attorney General to produce the letters written by Mr. Yeddyurappa to the Governor in support of his claim. When the members of the Congress and the JD(S) together constitute a majority in the House, it is unclear what letters Mr. Yeddyurappa could have presented to the Governor. No matter how things turn out from here on, the BJP has emerged as a bad loser. The party played a smart hand in Goa and Manipur to deny the Congress, but is unable to accept defeat in Karnataka when beaten at its own game. Politics is not always about reaching for power; sometimes it is also about learning to sit in the Opposition. After all, power is only one of the means of politics, not one of its ends. The BJP may have bested the Congress in Karnataka, but it may not have paid the price for this victory yet.
📰 Should we do away with the I&B Ministry?
No advanced democracy has an I&B Ministry. They instead have independent commissions
•While it is universally known that Sardar Vallabhbhai Patel briefly handled the Home Ministry after India attained Independence, it is a little-known fact that he also handled the Information and Broadcasting (I&B) Ministry. He used the I&B portfolio to reach out to the people with urgent messages during the country’s formative and most difficult period. That time was marked by post-Partition riots, the difficulty of settling millions of migrants from Pakistan, the problem of integrating more than 500 princely states and so on. It was also a time when literacy was very low and the circulation of newspapers even lower. Under those circumstances, All India Radio (AIR) was the only institution which could pass on the government’s momentous messages to both officials and the people. After the Constitution was adopted, AIR rendered a huge service to India’s culture not only by collecting all the available information on classical music in the country but also by getting both Carnatic and Hindustani music recorded by ace maestros. It also propagated new agricultural methods to reach out to the farmers directly, and played a crucial role in bringing about the Green Revolution.
Conferring autonomy
•Even while broadcasting services were put to such irreplaceable use, the founders of our Republic were acutely alive to the importance of promoting the autonomy of our democratic institutions. India’s first Prime Minister, Jawaharlal Nehru, speaking in the Constituent Assembly in 1948, said that our final goal should be to endow AIR with the same autonomy and strength as what is given to the BBC. The political demand for conferring autonomy gained volume only in the 1970s, because of which the B.G. Verghese Committee went into the question and submitted its recommendations. But it assumed the shape of a specific statute only in 1990 when leaders from all parties, including Rajiv Gandhi as the Opposition leader, reached a consensus. It fell on me as the I&B Minister in 1997 to notify the Act — the Prasar Bharati (Broadcasting Corporation of India) Act, 1990. At that time, I made a public statement that the time had come for abolishing the I&B Ministry.
•It is important to note that no advanced democracy, be it in Western Europe or in North America, has a Ministry called I&B. Those democracies instead have independent commissions. In the U.S., for example, the Federal Communications Commission has been effective in regulating the functions of television companies for more than a half a century. Some could turn around and tell me that Prasar Bharati already enjoys statutory autonomy. While I see the sense of humour in this riposte, I would like to say that any institution, particularly Prasar Bharati, cannot enjoy true autonomy without financial independence. The BBC enjoys financial autonomy as the citizens pay fees compulsorily and directly to it. As a consequence of this freedom, the BBC sometimes takes on the British Prime Minister as well, not to speak of the government.
Abolish the portfolio
•There are some friends who say that the demand for autonomy was relevant a few decades ago when private channels were neither available nor as effective as they are today. Public broadcasting services are autonomous in every democracy, though private channels are as prevalent as they are in our country. If a Minister is there for the portfolio, he/she cannot sit idle; they poke their nose into the functioning of such institutions by way of self-employment. Hence, the urgency to abolish this portfolio.
📰 States petition Kovind on 15th Finance Commission
Seek 13 changes to terms of reference
•Stepping up pressure, Finance Ministers of six States met President Ram Nath Kovind on Thursday and submitted a memorandum demanding 13 amendments to the Terms of Reference of the 15th Finance Commission.
•“The terms of reference violate the federal principle as enshrined in the Constitution, erode the autonomy of all States and bring significant financial hardship to all States,” the memorandum submitted by Finance Ministers of Kerala, Delhi, West Bengal, Punjab, Andhra Pradesh and Puducherry — T.M. Thomas Isaac, Manish Sisodia, Amit Mitra, Manpreet Singh Badal, Yanamala Ramakrishnudu and V. Narayanswamy.
‘Use 1971 data’
•Among the 13 amendments recommended by the Ministers is the use of the population data of 2011 by the Finance Commission. The Ministers have vociferously protested against this claiming that they should not be penalised for checking the population explosion while many other States such as Uttar Pradesh and Bihar, which have been unable to do so, are awarded for their lack of initiative.
•The memorandum demanded that the population data of 1971 should be used for devolution of funds as was used by all the previous Finance Commissions.
•The Ministers have said the terms of reference seek to control “populist measures.” The memorandum has demanded that this be deleted promptly. The States and the Union Territory concerned have been arguing that it is for the popularly elected governments to decide what is ‘populist’ and what isn’t.
•The other amendments sought include deletion of the reference to Direct Benefit Transfers (DBT). The 15th Finance Commission has said that the States will be assessed on progress made by them in promoting DBT. The Narendra Modi government has been flaunting increase in DBT as a key achievement.
•The FMs also want the reference to “flagship schemes of the government of India” to be deleted. The TOR says that “achievements in implementation of flagship schemes of the government of India” will be criteria to determine a State’s share from Central funds. The Ministers have argued that this is blatantly against the federal values in the Constitution.
📰 Growing cities: on Urban governance
A fresh look at urban governance is necessary as migration from rural areas picks up pace
•Cities are economically vibrant spaces around the world and draw a large number of rural migrants looking for better prospects. This is a sustained trend, particularly in developing countries now, as production, jobs and markets get concentrated. More evidence of this comes from the UN Department of Economic and Social Affairs, which has released its 2018 Revision of the World Urbanization Prospects. Forecasting for the year 2050, the UN agency estimates that the percentage of urban residents in India would be 52.8, compared to 34 today, while Delhi would edge past Tokyo as the world’s most populous city by 2028. India, China and Nigeria are expected to lead other countries and account for 35% of the projected growth in urban population by mid-century. This forecast frames the challenge before developing countries, India in particular. Urbanisation in the country is a complex process, since it is defined not by a constant migration of rural residents but by the flow of workers, mostly men, and the expansion of big cities through the addition of neighbouring towns. Among governments there is a strong policy emphasis on improving facilities in rural areas, indicating a political preference for reduced migration to urban centres, although there is a natural economic magnetism to cities. The imperative before the Centre and State governments is to come up with policies that provide adequate services in the villages, while investing in cities to ensure that their high levels of productivity and efficiency are not compromised.
•Even with only a third of the population living in cities, civic anarchy is rampant in the country. Housing deficits have led to the proliferation of slums, lack of enforcement of building norms has left the metros heavily congested, and poor investment in public transport has fuelled unsustainable levels of private vehicle use. Moreover, as recent data released by the World Health Organisation show, 14 Indian cities are among the top 20 worldwide with the worst air quality profiles for fine particulate matter of 2.5 micrometres. Most cities are also unable to collect and dispose of municipal waste scientifically, and simply dump them in the suburbs. Such a dismal scenario can only get worse with higher population concentrations, unless city governments come into their own. Even two-and-a-half decades after municipal laws were reformed, elected Mayors lack the stature and authority to introduce urgently needed reforms. Now is the time to take a fresh look at urban governance. While the Centre’s goal of homes for all by 2022 is laudable, it is unlikely to be realised without a push from the States, and the launch of schemes driven by innovation and low-cost approaches. Augmenting rental housing should be a priority within the plan. Integrating green spaces, open commons and wetlands will make cities cleaner and aesthetically richer.
📰 Making life easier for small savers
On the proposed Government Savings Promotion Act
•The Union Cabinet in February 2018 decided to bring a law to make life easier for small savers, especially those who save for girl children and senior citizens, and to “further strengthen the objective of ‘minimum government, maximum governance’”. It proposed the Government Savings Promotion Act by merging the Public Provident Fund (PPF) Act of 1968, the Government Savings Banks Act of 1873 and the Government Savings Certificates Act of 1959. There is no proposal to take away existing benefits to depositors through this merger. The main objective, as stated by the Ministry of Finance, is to make implementation easier for the depositors through this Act.
•The government says that the proposed Act has certain new benefits for depositors. For example, the PPF Act states that an account cannot be closed before completion of five financial years. So, if any depositor wished to close his account before five years, she could not. The proposed Act seeks to make premature closure of an account easier by introducing provisions through a specific scheme notification. The benefits of premature closure of Small Savings Schemes (SSS) may now be introduced to deal with medical emergencies, higher education needs, and so on.
•Second, investment in SSS can be made by a guardian on behalf of minor(s). Under the provisions in the proposed Act, the guardian may also be given associated rights and responsibilities.
•There was no clear provision earlier regarding deposits by minors in the existing Acts. A provision has been proposed to promote a culture of savings among children. And if the minor dies and there is no nomination, the balance amount shall be paid to the guardian. The entire rigmarole of procuring a succession certificate has been done away with. The Bill also has clear provisions on the operation of accounts in the name of physically infirm and differently abled persons.
•As per the existing Acts, if a depositor dies and nomination exists, the outstanding balances will be paid to the nominee. The proposed law has clearly defined the right of nominees.
•Unlike the existing laws, the proposed law allows the government to put in place a mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to small savings.
📰 180 days too long for resolving insolvency, says IBBI member
‘Removing such cases will help businesses move ahead’
•A member of the Insolvency and Bankruptcy Board of India (IBBI) said the current time limit to resolve insolvency cases was more than adequate. This assumes significance in light of demands for more time to resolve cases filed for bankruptcy.
•Currently, after a case is admitted in the National Company Law Tribunal, it has to be resolved within 180 days, failing which the company goes into liquidation. In exceptional cases, the NCLT may allow another 90 days for resolution.
‘No time should be lost’
•“The provision for 180 days is too long,” wholetime member of Insolvency and Bankruptcy Board of India (IBBI) Mukulita Vijayawargiya said at an event organised by CII. “In the present era, we have professionals with technology and offices that are increasing in efficiency.”
•“With the availability of these, why should any time be lost? The sooner we remove such cases, the sooner will we clear the way for the business sector to move ahead,” she said.
•Dr. Vijayawargiya added that although the IBBI was dealing with all accounts, “RBI has concentrated its attention on large and big accounts because they constitute more than 25% of the defaulters”.
•Former RBI executive director Madhukar Umarji, also present at the event, said all defaults should not be seen as criminal conduct.
•“When a loan is not repaid, the default is automatically construed as criminal conduct under the Code. But there could be situations where the default is purely a result of market forces. Therefore, it can’t be called criminal conduct in all cases,” Mr. Umarji said.
📰 Banks under PCA will get over legacy issues soon, says Goyal
In FinMin meet, representatives of 11 banks lay out action plan to exit framework
•Finance Minister Piyush Goyal on Thursday expressed confidence that the 11 banks placed in the Prompt Corrective Action (PCA) plan would overcome their ‘legacy’ issues and emerge stronger shortly.
•“The Centre would, over the next few days, ensure that every possible support is given to strengthen the resolve of these banks to come out of the PCA framework as quickly as possible,” Mr. Goyal told reporters following a meeting with the heads of the 11 public sector banks that are currently under the Reserve Bank of India’s PCA framework.
•“Today we had called all the banks that had been placed under PCA,” Mr Goyal added. “The 11 banks were represented at the highest level. Today, I have 11 extremely empowered and committed leaders of these banks who have shared some very good ideas to prepare the action agenda on a case by case basis and some collective ideas.”
•“I am very confident that the PSBs... will be able to overcome these legacy issues in a very short period.”
‘Indiscriminate lending’
•The banks under PCA are Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.
•“Indiscriminate lending of the past has caused this distress the banking sector is facing... I am confident we will ensure a very orderly growth of the industry and the highest levels of probity and accountability that is expected of PSBs,” he added.
