📰 Congress chief no longer a permanent member of Jallianwala Bagh Trust
LS passes change removing Congress president as permanent member of Trust managing monument
•Amid charges that the government led by Prime Minister Narendra Modi was trying to rewrite history, the Lok Sabha on Friday amended the Jallianwala Bagh Memorial Bill to remove the Congress president as a permanent trustee.
•The Bill was passed by a division of votes in which 214 members voted in favour while 30 were ‘against’ even as the Congress walked out in protest.
•Earlier, the debate witnessed very sharp and personal exchanges between members from Punjab. Shiromani Akali Dal member and Union Minister Harsimrat Kaur Badal alleged that a close relative of the Punjab Chief Minister had lauded General Dyer, who had ordered the shooting at Jallianwala Bagh in 1919.
•The exchange prompted Lok Sabha Speaker Om Birla to urge members to refrain from ‘doing politics’ over freedom fighters and the freedom movement.
•Moving the Bill, Culture Minister Prahlad Patel said national memorials could not be “political memorials” and ought to be kept away from politics. “No political party can claim hold over a trust like the Jallianwala Bagh Memorial.’’
•Hitherto, the trust that manages the memorial had included the Prime Minister as the chairperson, with the president of the Indian National Congress, Culture Minister, Leader of Opposition in the Lok Sabha, Punjab Governor and the Punjab Chief Minister as its members.
•But now, the Congress chief is being removed as a member while the leader of the single largest Opposition party in the Lok Sabha is being added as a member of the trust.
•Opposing the Bill, Congress member Gurjeet Aujla said: “This government wants to distort history, destroy history. You cannot remove the sacrifice of the Congress to the country’s freedom struggle”.
Azim Premji, Ashoka, KREA Universities among those denied the tag due to absence of global, Indian rankings.
•The IITs Madras and Kharagpur, Delhi University, University of Hyderabad, Amritha Vishwa Vidyapeetham and VIT are among the 20 institutions recommended for the grant of the Institute of Eminence status by the University Grants Commission on Friday.
•However, the UGC denied the tag to five private universities — Azim Premji University, Ashoka University, KREA University, Indian Institute for Human Settlements and the Indian Institute of Public Health — on the grounds that they have not been placed in any global or national rankings. Since their exclusion left a vacant slot on the list of private universities given the tag, the Satya Bharti Foundation — telecom major Airtel’s philanthropic arm — became the second greenfield institution to be given IoE status, after Jio Institute which is backed by the Reliance Foundation.
•“We considered two types [of institutions], those who are already ranked well and those which are potential institutions. We might have felt something has potential, but government may feel something else, they may have felt that if an institution is not ranked at all, it cannot be considered. It is entirely justified,” said N. Gopalaswami, former Chief Election Commissioner who headed the expert panel which initially identified the list of IoEs. He told The Hindu, “Greenfield institutions should not have been included in the category of private institutions at all. It should have been a separate category. But having been included, it was fair to consider them differently, without looking at rankings.”
•The Institute of Eminence scheme aimed at developing 20 world-class institutions which would put India on the global education map. Those selected will be given greater autonomy and freedom to decide fees, course durations and governance structures. The public institutions will also receive a government grant of ₹1,000 crore, while the private institutions will not get any funding under the scheme.
•The Gopalaswami panel initially recommended 11 institutions for the tag in July 2018. The Centre had then accepted six recommendations — IITs Delhi and Bombay, IISc Bangalore, BITS Pilani, Manipal University, and the yet-to-open Jio University. In December, the committee recommended 19 more names and asked the UGC to consider all 30 for the tag.
•However, following the Ministry of Human Resource Development’s decision to limit the scheme to the original 20 institutions — 10 private and 10 public — the UGC was forced to prune the list at its meeting on Friday. It chose to use the criterion of the QS-2020 world rankings, with the QS-2019 India rankings and NIRF rankings used as a tie-breaker. Any institution that did not figure in any rankings was excluded completely.
•“The first purpose of the IoE scheme is to take existing universities to global competitive status, and so we must consider their existing rankings. The other purpose is the need to get investment to build up world class institutions, hence the greenfield institutions on the list. Those left out are neither here nor there; they fall into a gap between the two categories,” explained a senior official of the Ministry.
•Five public universities also did not make the cut. Tezpur, Panjab and Andhra Universities were left out as they are not ranked. Savitribai Phule Pune University and Aligarh Muslim University are both in the same 801-1,000 ranking slab in the QS World rankings as the Benares Hindu University; however, BHU squeaked through as it was higher placed than the other two in the India rankings.
•Anna University and Jadavpur University have been given the IoE tag on a conditional basis as they are state universities, and will be finalised only after the Tamil Nadu and West Bengal governments issue an official communication allocating their share of funds (up to 50%).
•The other institutions which have been recommended for IoE status are Jamia Hamdard, Kalinga Institute of Industrial Technology, OP Jindal University and Shiv Nadar University.
•The UGC’s recommendations will now be submitted to the Ministry for final grant of the status.
📰 UAPA Bill gets Rajya Sabha nod
Congress, BSP back legislation cleared by LS on July 24
•The Unlawful Activities (Prevention) Amendment Bill, 2019 that empowers the Union Home Ministry to designate individuals as terrorists was passed in the Rajya Sabha on Friday with Congress and the Bahujan Samaj Party (BSP) supporting the legislation.
•In the 240-member House, 147 members voted in favour while 42 voted against the Bill.
•Parties like the Trinamool Congress, CPI(M), CPI, DMK, TDP, SP, AAP and RJD opposed the Bill.
•It was passed in the Lok Sabha on July 24. With the Rajya Sabha giving its assent, it will soon be notified as a law.
•Home Minister Amit Shah said gathering evidence against terrorists was a complex process and the law will help security agencies remain two steps ahead of them.
•He said the Samjhauta Express, Mecca Masjid and Ajmer Dargah blasts in which former Rashtriya Swayamsevak (RSS) member Aseemanand and others were acquitted recently were registered due to “political vendetta” and there was an attempt to link it to a particular religion.
•“The Samjhauta charge sheet was filed in 2012 and 2013. We only argued the case. Judge did not find anything, so the accused were acquitted. Who brought political agenda here,” Mr. Shah said.
•This is the third contentious legislation that has been cleared in the Rajya Sabha despite the ruling party not having a majority.
•Mr. Shah said it was important to identify terrorists and not just organisations.
•Attacking the Congress, he said the Opposition party should not talk about misuse and it should look into its past when Opposition leaders were jailed during the Emergency.
•Responding to concerns over the law being misused, he assured no one’s human rights would be violated as a four-stage scrutiny with provision for appeals has been prescribed when individuals are declared terrorists.
•Mr. Shah said all countries have laws to designate individuals as terrorists, noting that United States, European Union and the United Nations, besides countries like China, Pakistan and Israel also have such a law.
•Elaborating on the track record of the National Investigation Agency (NIA), he said out of 278 terror cases registered by the agency, charge sheet has been filed in 204. Of the 54 cases where judgments have come, conviction has been there in 48. He said 221 persons were convicted and 92 acquitted by the courts. A total of 131 charge sheets have been filed from June 1, 2014 to July 2019.
•Mir Mohammad Fayaz of the Peoples Democratic Party (PDP) said such laws were misused most in Jammu and Kashmir.
•“Our jails are filled with Kashmiris arrested in terror cases. Recently four Kashmiris were acquitted after 23 years,” Mr. Fayaz said.
•Congress leader P. Chidambaram said his party was not against the law but was opposed to some amendments.
•He said the issue was that of liberty of an individual and if the law was passed, it would be struck down by courts.
•Mr. Chidambaram asked why an individual should be named a terrorist when the organisation he belongs to has already been banned.
•Digivijaya Singh said the Congress does not have faith in the government’s intent.
•Rejecting the charge, Mr. Shah took a swipe at Mr. Singh saying, “Digvijaya Singh ji seems angry. It is natural, [as] he has just lost an election.”
📰 China threatens to retaliate against Trump tariffs
U.S. to impose 10% tariffs on $300 billion of Chinese imports from Sept. 1; Beijing says it won’t give an inch under pressure
•China on Friday said it would not be blackmailed and warned of retaliation after U.S. President Donald Trump vowed to slap a 10% tariff on $300 billion of Chinese imports from next month, sharply escalating a trade row between the world’s biggest economies.
•Mr. Trump stunned financial markets on Thursday by saying he plans to levy the additional duties from September 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains.
•Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.
•“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Ms. Hua told a news briefing in Beijing.
•“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle, we won’t give an inch,” she said, adding that China hoped the U.S. would “give up its illusions” and return to negotiations based on mutual respect and equality.
•Mr. Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.
•The newly threatened duties, which Mr. Trump announced in a series of tweets after his top trade negotiators briefed him on a lack of progress in talks in Shanghai this week, would extend tariffs to nearly all Chinese goods that the U.S. imports.
•The President later said if trade discussions failed to progress he could raise tariffs further — even beyond the 25% levy he has already imposed on $250 billion of imports from China.
•Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand that additional tariffs were “definitely not a constructive way to resolve economic and trade frictions”.
Bad behaviour
•U.S. Secretary of State Mike Pompeo, who was also in Bangkok, decried “decades of bad behaviour” by China on trade and said Mr. Trump had the determination to fix it.
•One Chinese official told Reuters it was not the first time Mr. Trump had “flip-flopped”, and that though the time between the talks being declared constructive and Mr. Trump’s threat of new tariffs was short, officials in Beijing were already prepared. “Discussion followed by a fight has become the normal pattern,” the official said.
•Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths that are used in everything from military equipment to consumer electronics, and penalties against U.S. companies in China, analysts say.
•So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of U.S. goods since the trade war broke out last year.
📰 U.S. formally withdraws from INF arms treaty
‘Russia is responsible for its demise’, said U.S. Secretary of State Mike Pompeo.
•The U.S. and Russia ripped up a Cold War-era missile pact on Friday in a move that raised the spectre of an arms race between the global superpowers.
•The 1987 Intermediate-Range Nuclear Forces (INF) treaty limited the use of medium-range missiles, both conventional and nuclear.
•U.S. Secretary of State Mike Pompeo announced Washington’s formal withdrawal in a prepared statement at the ASEAN meet in Bangkok, minutes after Russia pronounced the treaty to be “dead”.
•Both sides had signalled their intention to pull out of the treaty for months, trading accusations of breaking the terms of the deal.
•“Russia is solely responsible for the treaty’s demise,” Mr. Pompeo said in a statement issued at an Association of Southeast Asian Nations (ASEAN) foreign ministers' meeting.
•Shortly before Pompeo's announcement, Russia’s Foreign Ministry in Moscow said the deal had been terminated at the “at the initiative of the U.S.”.
•But deputy foreign minister Sergei Ryabkov also urged the U.S. to implement a moratorium on deploying intermediate-range nuclear missiles after leaving the INF.
•Washington has for years accused Russia of developing a new type of missile, the 9M729, which it says violates the treaty — claims that NATO has backed up.
•The missile has a range of about 1,500 kilometres according to NATO, though Moscow says it can only travel 480 kilometres.
•The INF treaty limits the use of missiles with ranges of 500 to 5,500 kilometres.
•“Russia failed to return to full and verified compliance through the destruction of its noncompliant missile system,” Pompeo said, referring to the 9M729 ground-launched cruise missile.
•The 29-country transatlantic NATO alliance rallied behind Washington on Friday, blaming Russia for the treaty's demise and vowing to respond.
•“We regret that Russia has shown no willingness and taken no demonstrable steps to return to compliance with its international obligations,” NATO said in a statement.
📰 Too much of reforms has led to slowdown: NITI Aayog CEO
Amitabh Kant attributes downshift to spate of measures including GST, RERA and IBC
•A spate of reforms undertaken by the government has led to the current slowdown in the country, Amitabh Kant, the CEO of policy think-tank NITI Aayog, said on Friday. This came as a note of caution from the senior official as he was advocating a series of policy decisions to revive the economy.
Greater liquidity
•“Firstly, you need to bring in greater levels of liquidity. Secondly, you need to revive the animal spirit of the private sector, you can never create wealth without the private sector. Thirdly, the government needs to get out of business in a range of areas and you need to recycle a lot of government assets such as roads. We have done this with airports. Gas grids, gas pipelines, transmission lines should be privately-owned. NITI Aayog has recommended a vast range of public sector for privatisation. Once we have private sector coming in, bank credit will start flowing in and this is critical. Fourthly, we must push for major structural reforms as we did earlier,” Mr. Kant said at a Bloomberg NEF summit held in New Delhi.
•“One of the reasons for the slowdown is that it has had too much of reforms — GST, IBC, RERA — a huge set of reforms which we have undertaken and I think the next round of reforms must revolve around sectors like oil and gas, mining, coal. We must commercialise coal mining, railways and they will really drive the growth in India,” he said.
•Talking about the government’s push for electric vehicles in the country, the NITI Aayog CEO said that the government would work to develop India as a hub for manufacture and export of EVs.
•“We have lost out on the mobile revolution, photo-voltaic revolution, telecom equipment revolution. We are a nation of massive domestic demand, but all this demand we import. We will not allow that to happen in the EV [electric vehicle] world.
•“We will ensure that India becomes a global hub for manufacturing and exports,” Mr. Kant said at the summit in New Delhi. Bloomberg NEF released a report on the future of mobility in India and has forecast that India may become the fourth-largest passenger EV market by 2040 with 26 lakh vehicles. China, U.S. and Germany will top the table.
📰 Elected directors in PSBs will be appointed by board: RBI
Banking regulator mandates ‘fit and proper’ criteria
•The Reserve Bank of India (RBI) has mandated that the elected directors of public sector banks (PSBs) are to be appointed by the nomination and remuneration committee of the board of the respective banks.
•The RBI has come out with guidelines on ‘fit and proper’ criteria of elected directors in PSBs and said all these banks were required to constitute a nomination and remuneration committee consisting of a minimum of three non-executive directors from the board, out of which not less than one-half will be independent directors and should include at least one member from the risk management committee of the board. “The non-executive chairperson of the bank may be appointed as a member of the committee but shall not chair such a committee,” the RBI said.
Maximum tenure
•On the tenure, the RBI said an elected director can be appointed for three years and could be re-elected but cannot hold office for than six years. “The candidate should not be holding the position of a Member of Parliament or State Legislature or municipal corporation or municipality or other local bodies,” the RBI said.
•Candidates engaged in stock broking, or a member of any other board of a bank or financial institution, connected with hire purchase, financing, money lending, investment, leasing and other para banking activities cannot be considered for the appointment.
•Moreover, the RBI said the candidate should not be acting as a partner of a chartered accountant’s firm which is currently engaged as a statutory central auditor of any nationalised bank or the State Bank of India.
📰 The taproot of conservation justice
Cutting down the Forests Right Act will only weaken the conservation regime and affect the rights of forest dwellers
•I have had the good fortune to work in, visit and learn about protected areas and wildlife habitats across India since 1980. Beginning in the late 1980s, I have written and spoken about the ecology and conservation of Indian wildlife to numerous and varied audiences. One question that is invariably asked by foreigners is how India has managed to conserve such a diversity of wildlife given its large population and development challenges. To me it has always been clear that the tolerance and, in many cases, the reverence that local communities have for Nature has been absolutely vital for the sustained success of the conservation efforts of the government and other agencies. Not to forget the widespread and long conservation track record of the local communities; the state of sacred groves is a very good example.
•The Forest Rights Act (FRA) is a piece of social legislation which aims to address the historical injustice that our forest dwelling communities have had to face for nearly 150 years by providing them with security of tenure over land for cultivation and habitation through individual rights. It also provides access to a variety of resources through more than a dozen types of community forest rights. The FRA also empowers forest dwelling communities to protect, regenerate, conserve and manage any community forest resource which they have been traditionally protecting and conserving for sustainable use. It has the provision for creating critical wildlife habitats within protected areas which currently is the strongest conservation provision among existing laws of the country.
Legal challenges
•It is extremely unfortunate that the very constitutionality of the FRA was challenged in the Supreme Court in 2008 by about half a dozen conservation organisations. The court has tagged many other cases including from several High Courts which are currently being heard jointly. The court’s order of February 13, 2019 since put in abeyance by its order dated February 28, 2019 highlights the very tardy implementation of the FRA by the State governments.
•One of the key arguments of the petitioners has been that it is beyond the legislative competence of Parliament to enact the FRA as ‘land’ is a state subject. Tenuous as this is, if this argument of the petitioners is accepted, the Wildlife Protection Act and the entire architecture of forest laws will have to be dismantled as ultra vires as all of them deal with ‘land’, including the Indian Forest Act and the Forest (Conservation) Act.
•The February 13 order of the Supreme Court directs the eviction of lakhs of forest dwellers whose claims have been rejected under the FRA. With recent media reports showing that many State governments have admitted to the Supreme Court that their implementation of the FRA has been incomplete and flawed — with due process not having been followed especially while rejecting claims — the misguided and unmeritorious nature of this whole legal challenge becomes very clear.
What the FRA is
•The FRA has been savagely criticised as a land distribution legislation, which it is not. The FRA very clearly states that forest dwellers who are either Scheduled Tribes or Other Traditional Forest Dwellers are only entitled to claim both individual and community forest rights through a clear process of submitting a claim and after its verification and subsequent approval or rejection. For the rejected cases, an appeal process has been outlined. The FRA aims to only confirm tenure and access rights which in some sense the forest dwellers have been exercising de facto but under severe restrictions and control especially by the forest department. In fact, it is the failure of the state to settle pre-existing rights under existing forest and conservation laws that created the situation of historical injustice.
•The FRA does not sanction any fresh clearance of forest, as individual rights over land will only be granted if the forest dweller was in possession of that parcel of land on December 13, 2005. It also limits the extent of land that can be granted to the area that was occupied on December 13, 2005 and places an upper limit of four hectares per claimant for individual rights. These provisions are often overlooked or deliberately suppressed by those who criticise FRA.
•The FRA, by design, has tremendous potential to strengthen the conservation regime across India by recognising rights of forest dwellers over land and community forest resources, a key factor for conservation to succeed as shown both by research and practice in many countries. By democratising forest governance and conservation through the provision of rights and authority to local communities and gram sabhas for conservation and management of forests, the FRA will empower gram sabhas of the forest dwelling communities to halt the destruction of forests, as especially highlighted in the Niyamgiri case. Implementing the FRA in letter and spirit with empathy for forest dwellers will be a decisive step by India to achieve conservation justice.
📰 Dial ‘M’ for Manufacturing
The recent PLFS data, which show a historic decline in manufacturing employment, make one fact plain — India desperately needs a comprehensive industrial policy, absent since 1991
•The Union Budget suggests that the government has not recognised the need to create more manufacturing jobs. For the first time ever, manufacturing jobs fell in absolute terms between 2011-12 and 2017-18, to quote the Periodic Labour Force Survey (PLFS) of the National Sample Survey Organisation (NSSO).
•Further, during the same six-year period, the total workforce actually shrank from 474 million to 465 million, a first in India’s post-Independence history. While the unemployment rate for all age groups increased from 2.2% (2011-12) to 6.1% (2017-18), youth unemployment rate surged to a level never witnessed before in the Indian economy, increasing from 6.1% (2011-12) to 17.8% (2017-18). The PLFS data also show that while the number of persons searching for jobs tripled between 2011-12 and 2017-18, with the labour force growing at about two million people per year, the economy did not generate enough jobs. The total employment in the intervening years fell by 9.1 million, resulting in a historical increase in the unemployment rate (6.1% or 30.1 million people). Rise in joblessness among the educated youngsters, who preferred to remain unemployed rather than taking up low-paying jobs, contributed to this trend.
Jobs in other sectors
•Here, we need to mention that it is no one’s case that India, considered to be the world’s ‘fastest-growing economy, is not creating jobs at all. For instance, jobs in services and non-manufacturing industry (in the areas of construction, mining and utilities) have grown in absolute terms between 2011-12 and 2017-18. However, a gain in these two fields is not enough to offset the loss in agriculture and manufacturing jobs. It also needs to be asserted that while a reduction in the number of people depending on agriculture is a positive development, a fall in manufacturing employment is a worrying reality.
•We also need dispose off the concern that the PLFS data are flawed because they do not capture new type of ‘jobs’ such as platform economy employment created by ride-hailing services (like Ola and Uber); food delivery services (Swiggy and Zomato); and self-employment jobs created by Mudra loans. In reality, these are all informal/unorganised-sector jobs, which NSSO samples always capture. It is bizarre to assume that in an economy where four out of every five jobs are in the informal sector, agencies with nearly seven decades of conducting surveys would not capture such jobs.
•Coming to the sector-wise unemployment figures, the number of people engaged in agriculture continued to decline at the rate of 4.4 million per annum — it fell from 232 million in 2011-12 to 205.3 million in 2017-18. This was consistent with the reduction in growth rate of agricultural output. However, as mentioned earlier, manufacturing jobs, which showed a total decline of 3.5 million, showed a dismaying downward drift. Further, the jobs categories under ‘non-manufacturing industry’ — mostly in the construction sector — showed a slow growth. There were only 3.6 million construction jobs added during the six-year period. Fortunately, the service sector contributed significantly. However, the employment growth in this sector, 17.1 million, as marginally lower than that in the period between 2004-05 and 2011-12, of about 20 million. In many cases, these jobs were seen as an an employment of last resort, especially for poorly educated migrants just out of agriculture.
•The trend witnessed with regard to manufacturing employment as per the PLFS data is consistent with that shown by data from the Index of Industrial Production (IIP). It is likely that the informal sector registered negative growth in these years because of demonetisation, the introduction of Goods and Services Tax (GST) and slowdown in exports.
Budget proposals
•Coming back to the Union Budget, some effort was made to create jobs in Micro, Small and Medium Enterprises (MSMEs) and construction, for instance, through the Interest Subvention Scheme. and programmes like Pradhan Mantri Awas Yojana (housing schemes for rural and urban areas). However, public investment in housing alone will not revive job growth.
•To sum up, there is no alternative to a comprehensive industrial policy, absent in India since 2011. The National Manufacturing Policy announced in 2011 was never implemented. The result is that the share of manufacturing in GDP has remained stuck at 16% since 1991, while the share of employment in manufacturing has stagnated at around 12.5%. Meanwhile, manufactured imports continue to flood our markets.
📰 Explaining the Asian rate cuts wave
Policy makers across Asia should ensure enough ammunition to manage a prolonged economic downturn
•The latest International Monetary Fund (IMF)-World Economic Outlook update in July 2019 has confirmed a growing belief that global growth has decelerated and dark clouds seem to be looming in the near term. Specifically, the IMF has downgraded global growth multiple times since October 2018 and now projects it to be 3.2% compared to 3.6% in 2018.
The China factor
•While the deceleration in economic activity is broad-based among both the advanced and developing economies, particular attention should be paid to China. The country has faced strong headwinds to growth both because of the ongoing supply-side reforms, including dealing with financial risks (reining in of shadow banking and hidden debt of local governments), as well as the negative effects of escalating tariffs and their consequent impact on its exports and investment. It is noteworthy that China is one of the few major economies that is expected to continue to decelerate into 2020 (along with Japan which is faced with acutely unfavourable demographics and seems unable to escape persistent deflationary pressures).
•As corporates look to reconfigure their China-centric supply chains (both in response to the ongoing policy uncertainties and rising protectionist sentiments), many export-dependent Asian economies that are a part of the intricate production networks have also inevitably been hard hit. While there have been some short-term beneficiaries of the export and trade diversion from China to countries such as Vietnam, the global external demand slowdown has more than outweighed these gains. For instance, given Singapore’s small size and acute openness, it has often acted as a recession barometer for the rest of Asia. Latest data show that exports from the city state have collapsed and the Singapore economy is expected to face stagnation in 2019 on the back of a sharp slowdown in the manufacturing sector. This does not bode well for other trade-dependent economies in the region.
Asian banks to the rescue?
•In response to the global economic slowdown as well as generally subdued inflationary pressures, many Asian central banks (India, China, Indonesia, Malaysia, the Philippines, South Korea) have begun to ease monetary policy. However, this generalised loosening has happened largely following the recent signals from the U.S. Fed that it is set to embark on a new round of rate cuts in response to the slowdown in the United States and the rest of the world. In fact, in his congressional testimony on July 10, 2019, chairman Jerome Powell emphasised the slowdown in global growth as the main reason for the Fed moving towards a more accommodative stance, leading some to suggest that he has become the “world’s central banker”.
•The recent wave of rate cuts in Asia is consistent with research which suggests that emerging economies tend to be cautious about lowering interest rates when the base country (usually the U.S.) does not do so as they are concerned about potential capital flight and sharp currency depreciations which in turn could have negative repercussions on domestic firms and other entities with unhedged external borrowings in foreign currencies. However, when interest rates in the base country decline, while emerging economies may experience massive surges in capital inflows if they stand pat on interest rates, they can maintain monetary policy autonomy via a combination of sterilised foreign exchange intervention (leading to sustained reserve accumulation) as well as tightening of capital controls and/or use of macro prudential policies (MaPs).
•Alternatively, if the emerging economies are themselves faced with an economic slowdown, they are comfortable lowering their interest rates along with the base country, as is the case currently in Asia. This said, it is wise for Asian policy makers to ensure that they have enough ammunition to manage a prolonged downturn given that 2020 is “precarious” with many downside risks, as the IMF’s chief economist, Gita Gopinath, put it.
RBI’s monetary policy stance
•Where does all of this leave India? On the one hand, since India has not been well-integrated with the Asian and global supply chains, it has not been as impacted directly by the China-U.S. trade war. On the other hand, given existing acute domestic bottlenecks, policy missteps and ongoing structural challenges, India has not been able to reap significant benefits as an alternative production and export platform to China.
•On the back of a prolonged downturn in the capex cycle, the IMF has downgraded projected growth for India to 7% in 2019. This is broadly in line with the forecasted range by the Reserve Bank of India (RBI). While this growth is admirable relative to other major countries, it is well below the country’s likely potential growth of 7.5% and 8%.
•In view of this “growth recession” and subdued inflation, along with a lack of fiscal space, and with the government having been distracted by the general election, the RBI moved much earlier than most of its Asian counterparts in taking steps to lower interest rates, having cut rate multiple times by 25 basis points since October 2018 to a nine-year low in nominal terms. The concerns here however have been threefold.
•One, despite the rapid interest rate cuts, India’s real interest rates are still higher than most other countries, though it remains unclear what the neutral real interest rate consistent with India’s potential output actually is. The statement by RBI Governor Shaktikanta Das following the June 2019 interest rate cut that the RBI’s policy stance “has again changed… from ‘neutral’ to ‘accommodative’” presumably suggests that he views current real interest rates to be below equilibrium. This is rather odd in view of the fact that real rates have actually risen in recent times.
•Two, more than most other countries in the region, an ongoing concern for India is that interest rate policy transmission to bank rates tends to be rather slow and limited. This is likely due to a combination of factors: the banking system has been faced with a deterioration in asset quality and remains saddled with bad debts; there has been and anaemic deposit growth; and there is limited scope to reduce deposit rates.
•Three, despite the interest rate cuts, India’s real effective exchange rate (REER) has actually appreciated somewhat (around 7%) since October 2018, consistent with the fact that real interest rates have not declined. This lack of price competitiveness boost is especially of concern given that external demand is expected to remain subdued and uncertain and other regional currencies may themselves face depreciations pressures following the dovish policy stances by their central banks which could possibly translate to further REER appreciation in the rupee.
Sovereign bond issue
•Going forward, if India is to succeed in its ambition of becoming a $5-trillion economy by 2024-25, there can be no substitute for undertaking the necessary structural reforms needed to jump-start private investments and longer-term growth. However, in the short term, in all likelihood, monetary policy will have to remain accommodative (more so than what it is currently) and much greater attention will be needed to be paid on how to revive public capex without raising the cost of capital further.
•In the face of constraints in raising revenues in a slowing economy, the government’s preferred solution seems to be to issue overseas sovereign bonds rather than streamline subsidies and revenue expenditures. The proposed $10 billion sovereign issuance is manageable vis-à-vis the countries stock of forex reserves, while India’s sovereign external debt (as share of GDP) is modest at present. However, increases in external borrowings add an additional element of risk to the economy. Such a move also likely complicates monetary policy further, as any adverse exchange rate movements will lead to a ballooning of interest payments on government debt which is already eating up around a quarter of budgetary spending. It is not clear that the current policy mix is ideal for India.
📰 Time to articulate a ‘Moral Code of Conduct’
A fine example of such a blueprint is the Bangalore Principles of Judicial Conduct
•Of late, the poisoning of public discourse in India through frequent invocation of religion by politicians has reached alarming levels. Conventionally, the place of religion in politics has been examined with reference to the secular scheme of the Constitution. Leaders have taken recourse to deeming secularism as ‘undesirable’ and giving semantic reconstructions to religious concepts.
•However, the current political class seems keen on shedding all pretences of engaging in discourse that is both constitutionally sanctioned and in the interest of democracy. Singling out of communities in the name of religion and justifying gruesome acts of violence committed against them have become so commonplace that it perhaps no longer bothers our conscience.
Ethics in politics
•Philosophers and political scientists have long debated the role of ethics in politics with some insisting on a complete separation and others maintaining that an inbuilt ethical architecture exists within the very scheme of politics. At the same time, there are others who have neither disputed the indispensability of ethics to politics nor as a matter of principle decried the appeal of setting ethical limits but simply highlighted some pragmatic issues. It was against this backdrop that the principle of constitutionalism was devised. However, given the inherent limitations of constitutional law, perhaps we need to revisit the original question of exploring links between ethics and politics and its promise in pre-empting illegitimate and pernicious political grandstanding.
•It has been over two years since the Supreme Court’s Constitution Bench interpreted Section 123(3) of the Representation of People Act, 1951 as outlawing the invocation of religion in electioneering. Notwithstanding the genius of this verdict, the political class of this country has continuously failed to honour the judgment.
•Almost two and a half decades ago, the Supreme Court, while proclaiming secularism as a basic feature of the Constitution in the landmark Bommai case, had emphatically declared that “no party or organisation can simultaneously be a political and a religious party” in a secular state. Elaborating further, the Court stated: “If a political party espousing a particular religion comes to power, that religion tends to become, in practice, the official religion” thereby introducing an imbalance in our constitutional system. Even as the Constitution, under Article 144, enjoins the civil and judicial authorities of the State to act in aid of the Supreme Court, the continuous attempts by political parties to make references to religion without attracting any significant civil or penal consequences make the effectiveness of the verdict and of the law as a tool for ensuring ethical political conduct really suspect.
Limitations of existing law
•Piecemeal interventions made by the Central and State Election Commissions and tribunals in infusing a semblance of probity into the electoral process have also been largely in vain, given the creative ways in which politicians make use of religion and religious symbols while addressing the electorate, coupled with the constraints of the institutions charged with the maintenance of standards of political conduct.
•The Representation of the People Act, 1951 only regulates the conduct of elections, while the Model Code of Conduct only comes into operation upon the notification of the election schedule. Besides, the requirement of strict interpretation and rigorous standard of proof in election trials stultifies the range of remedies available under the relevant enactments. Hence, as elections approach, it is not uncommon to come across instances of leaders frequenting places of worship; seeking endorsements from different religious heads; and delivering hate speeches.
•Given this state of affairs, articulating a comprehensive ‘moral code of conduct’ applicable across party lines seems to be the only way out. Such a code may draw upon the wisdom of experts, both at the national and international levels. A fine example of such a blueprint as applicable to judges is the Bangalore Principles of Judicial Conduct, 2002. Conceptualised against the backdrop of rising concerns about corruption within the judiciary, the document outlines the core virtues of judicial life — independence, impartiality, integrity, propriety, equality, competence and diligence — in operationalisable terms.
•Given its pull, religion invariably tends to dominate political conversation to the exclusion of other topical issues. The contest among political parties to outscore each other in religion-based bigotry is likely to culminate in wholesale disenchantment among sections. It is only hoped that the political class will wake up to this reality sooner rather than later and devise principles of ethical conduct through consensus.
•The role of the media as a watchdog of democracy will also be very crucial. It is high time that this powerful institution revisits its notion of newsworthiness and puts an end to the undue popularisation of abhorrent religious rhetoric so as to disincentivise the political class from capitalising on religious prejudices and peddling pernicious forms of intolerance.
