The HINDU Notes – 06th February 2020

📰 PM pitches for boost to defence exports

‘Start-ups and MSMEs will be given emphasis’

•India became the world’s largest arms importer as it did not utilise its capacities to full potential after Independence, Prime Minister Narendra Modi stated on Wednesday and asserted that India was looking to achieve defence exports worth Rs. 35,000 crore in the next five years.

•“Post Independence, we did not use our defence opportunities and abilities to the full potential. Our policies and strategies remained focused on import. India thus became the largest arms importer in the world,” Mr. Modi said at the inaugural of the 11th Defexpo. After 2014, the government had undertaken several policy reforms, he pointed out.

•Mr. Modi talked about India turning into a manufacturing hub for military platforms and noted that defence manufacturing had found new energy. “In the last two years, defence exports worth Rs. 17,000 crore has been achieved; it is up from Rs. 2,000 crore in 2014,” he said.

•A long-term integrated defence plan was being conceptualised with emphasis on start-ups and Micro, Medium and Small Enterprises (MSMEs). Two hundred defence start-ups were likely to come up to give a push to indigenisation. “Defence manufacturing will not only make us self-reliant but also ensure we are prepared to help friendly countries in the region if required,” he said.

•Mr. Modi declared that India’s ambitions in the defence sector were not directed against anyone. “India has been a trustworthy partner of peace.”

•Mr. Modi also spoke about the importance of Artificial Intelligence (AI).

•He said his government had created a road map to increase its usage in the defence sector.

📰 Bill to resolve disputed income tax cases introduced in LS

Vivad Se Vishwas Bill aims to settle Rs. 9.32 lakh crore in cases

•Finance Minister Nirmala Sitharaman on Wednesday introduced a bill in the Lok Sabha to provide for a mechanism to settle disputed tax cases to the tune of Rs. 9.32 lakh crore.

•However, Congress leader in the Lok Sabha Adhir Ranjan Chowdhury objected to the Direct Tax Vivad Se Vishwas Bill, 2020, saying it violates parliamentary tradition by using Hindi and English language.

•Introducing the bill, Ms. Sitharaman said it focussed on trust building rather than being an effort towards mere tax resolution. She informed the House that it would not be an open-ended scheme but would have a specific timeframe. She said the bill would reduce the litigation expenditure for the government and generate revenue.

•Opposing the introduction, Mr. Chowdhury said the bill’s name was not only an attempt to impose Hindi but will also hurt the tax collection efforts.

•Joining the debate, his party colleague Shashi Tharoor said the bill equated an honest taxpayer with the dishonest tax payer and violated the principle of equality.

•The Finance Minister, however, pointed out the contents can be debated later.

•In her Budget speech announcing the Vivad se Vishwas scheme, Ms. Sitharaman had said nearly five lakh cases of tax disputes were pending in various tribunals.

•Under the scheme, taxpayers whose liabilities are caught in dispute can pay their taxes by March 31, 2020 and avail themselves of a complete waiver of interest and penalty.

📰 Cooperative banks to come under Reserve Bank purview

Regulator gets powers to supersede board of any such bank in financial distress

•In the wake of the recent Punjab & Maharashtra Cooperative (PMC) Bank crisis, the Union Cabinet on Wednesday approved amendments to the Banking Regulation Act to bring 1,540 cooperative banks under the Reserve Bank of India (RBI) regulation.

•Cooperative banks have 8.6 lakh account holders, with a total deposit of about Rs. 5 lakh crore.

•Union Minister Prakash Javadekar told reporters that administrative matters would continue to be under the Registrar, Cooperative. However, cooperative banks would be regulated under the RBI’s banking guidelines. Their auditing would also be done as per its norms.

•Qualifications would be laid down for appointments, including that of Chief Executive Officers. Prior permission from the RBI would be required for the appointment of key positions. The regulator would deal with issues such as loan waivers.

•The RBI would also have powers to supersede the board of any cooperative bank in financial distress.

•These measures would be implemented in a phased manner, said Mr. Javadekar.

•The proposed amendments, along with the government’s decision to increase the insurance cover on bank deposits from Rs. 1 lakh to Rs. 5 lakh, have been brought to strengthen the financial stability of cooperative banks and boost public confidence in the banking system.

•In the PMC Bank case, the RBI had to step in last year after massive irregularities in its loan accounts were detected. The regulator had to place a withdrawal limit for account holders, which led to a major public strife and protests by them.

📰 SC panel recommends several prison reforms

Phone call a day, cleaner kitchens mooted

•Every new prisoner should be allowed a free phone call a day to his family members to see him through his first week in jail.

•This is among the several recommendations — besides modern cooking facilities, canteens to buy essential items and trial through video-conferencing — made by a Supreme Court-appointed committee to reform prisons.

•The 300-page report was taken up for hearing on Wednesday before a Bench led by Chief Justice Sharad A. Bobde, who asked amicus curiae Gaurav Agarwal to study the report.

‘Common bane’

•The court said overcrowding is a common bane in the under-staffed prisons. Both the prisoner and his guard equally suffer human rights violation. The undertrial prisoner, who is yet to get his day in court, suffers the most, languishing behind bars for years without a hearing.

•The Justice Amitava Roy (retd.) Committee concluded that most prisons are “teeming with undertrial prisoners”, whose numbers are highly disproportionate to those of convicts. It said there should be at least one lawyer for every 30 prisoners. This is not the case now. Speedy trial remains one of the best ways to remedy the unwarranted phenomenon of over-crowding.

•The Prison Department has a perennial average of 30%-40% vacancies.

•“The shortage has lingered over the years,” the report said.

•Another recommendation is for the use of video-conferencing for trial. “Physical production in courts continued, which however remains far below the aspired 100% in several States, mainly because of unavailability of sufficient police guards for escort and transportation,” it said.

‘Primitive and arduous’

•The report described the preparation of food in kitchens as “primitive and arduous”. The kitchens are congested and unhygienic and the diet has remained unchanged for years now.

•The court had in September 2018 appointed the Justice Roy Committee to examine the various problems plaguing prisons, from overcrowding to lack of legal advice to convicts to issues of remission and parole.

•Besides Justice Roy, a former Supreme Court judge, the members included an IG, Bureau of Police Research and Development, and the DG (Prisons), Tihar Jail.

•The decision was in reaction to a letter written by former Chief Justice of India R.C. Lahoti highlighting the overcrowding of prisons, unnatural deaths of prisoners, gross inadequacy of staff and the lack of trained staff.

📰 ‘Surrogate mothers need not be close kin’

15 major changes in Bill suggested by Rajya Sabha Select Committee

•A surrogate mother need not be a “close relative”, recommended the Rajya Sabha Select Committee on Surrogacy (Regulation) Bill, 2019, which also advocated omission of the five-year limit before seeking surrogacy.

•This is among the 15 major changes suggested by the 23-member committee that presented its report in the Upper House on Wednesday.

•The major changes include allowing single women (widow or a divorcee and Persons of Indian Origin) to avail themselves of surrogacy and increasing insurance cover for the surrogate mother from the 16 months proposed in the Bill to 36 months.

•Stating that requiring the surrogate mother to be a “close relative” potentially restricts the availability of surrogate mothers, affecting genuinely needy persons, the committee has recommended the removal of this requirement from the Bill.

•“A willing woman shall act as surrogate mother and be permitted to undergo surrogacy procedures as per the provisions of this Act,” it said.

•The other major recommendation concerns deleting the definition of “infertility” as “the inability to conceive after five years of unprotected intercourse” on grounds that it was too long a period for a couple to wait for a child.

•The Surrogacy (Regulation) Bill, 2019 is yet to be passed by the Rajya Sabha and the committee has held 10 meetings since the Bill was referred to it by the Lok Sabha on November 21, 2019.

📰 Course correction for the Speaker’s office

Given how India’s electoral system and political conventions shadow the office, a major revamp is necessary

•Recently, the Supreme Court of India while adjudicating upon the matter relating to the disqualification of MLAs in the Manipur Legislative Assembly under the Tenth Schedule in Keisham Meghachandra Singh vs. the Hon’ble Speaker Manipur Legislative Assembly & Ors. made a significant suggestion. It recommended that Parliament should rethink as to whether disqualification petitions ought to be entrusted to a Speaker as a quasi-judicial authority when such a Speaker continues to belong to a particular political party either de jure or de facto .

•It was of the opinion that Parliament may seriously consider a Constitutional amendment to substitute the Speaker of the Lok Sabha and Legislative Assemblies with a ‘permanent Tribunal headed by a retired Supreme Court judge or a retired Chief Justice of a High Court, or some other outside independent mechanism. This is to ensure that such disputes are decided both swiftly and impartially, thus giving teeth to the provisions contained in the Tenth Schedule, which are so vital in the proper functioning of India’s democracy’, according to a media report. More than such advice, what is interesting is the underlying reasoning which revolves around the nature of functions exercised by the Speaker.

Range of functions; a symbol

•The nature of duties of the Speaker, technically as an “arbiter” or a “quasi-judicial body” should not be limited exclusively to matters under the Tenth Schedule; rather, it extends to a range of its functions. While facilitating the business of the House and to maintain decorum in the House, the Speaker has ‘extensive functions to perform in matters regulatory, administrative and judicial, falling under her domain. She enjoys vast authority under the Constitution and the Rules, as well as inherently’.

•She is the ‘ultimate interpreter and arbiter of those provisions which relate to the functioning of the House. Her decisions are final and binding and ordinarily cannot be easily challenged. She decides the duration of debates, can discipline members and even override decisions by committees. She represents the collective voice of the House and is the sole representative of the House in the international arena’.

•Jawaharlal Nehru, one of the chief architects of India’s freedom and a moving force behind its Constitution, describes the position as: “The Speaker represents the House. She represents the dignity of the House, the freedom of the House and because the House represents the nation, in a particular way, the Speaker becomes a symbol of the nation’s freedom and liberty. Therefore, that should be an honoured position, a free position and should be occupied always by persons of outstanding ability and impartiality.”

•However, on several occasions, the Speaker’s role has been questioned on the allegation of bias. The office has been criticised for being an agent of pernicious partisan politics. Notably, the Supreme Court has observed in Jagjit Singh versus State of Haryana as “…Without meaning any disrespect for any particular Speaker in the country, but only going by some events of the recent past, certain questions have been raised about the confidence in the matter of impartiality on some issues having political overtones which are decided by the Speaker in his capacity as a Tribunal.” The reasons behind the counterproductive machinations of the Speaker are not too far to seek. As a minority view, Justice J.S. Verma in Kihoto Hollohan vs Zachillhu And Others observed: “The Speaker being an authority within the House and his tenure being dependent on the will of the majority therein, likelihood of suspicion of bias could not be ruled out.” Currently, the extent of the Speaker’s political commitment often depends on the personality and character of the person holding the office. Howsoever desirable the proposition of neutrality may be, in the present circumstances, it would be unrealistic to expect a Speaker to completely abjure all party considerations while functioning as there are structural issues regarding the manner of appointment of the Speaker and her tenure in office.

•Since the electoral system and conventions in India have ‘not developed to ensure protection to the office, there are cogent reasons for Speakers to retain party membership. A member is appointed to the office of the Speaker if a motion nominating her is carried in the House. Elections are not always by consensus and there have been cases when different parties have fielded their own candidates. All political parties campaign in the constituency of the Speaker. Even if the Speaker is re-elected to the House, the office of the Speaker in India is still open for elections’, according to a paper published by The Hindu Centre for Politics and Public Policy. Therefore, what is required is not merely incidental changes in the powers of the Speaker; rather a major revamp in the structure of the office itself is necessary. It is suggested that a scheme should be brought wherein Speakers should renounce all political affiliations, membership and activity once they have been elected, both within the Assembly and in the country as a whole.

Upholding neutrality

•Reference can be sought from the United Kingdom where the ‘main characteristic of the Speaker of the House of Commons is neutrality. In practice, once elected, the Speaker gives up all-partisan affiliation, as in other Parliaments of British tradition, but remains in office until retirement, even though the majority may change. She does not express any political views during debates and is an election candidate without any ticket’, says an IPU report. Impartiality, fairness and autonomy in decision-making are the hallmarks of a robust institution. It is the freedom from interference and pressures which provide the necessary atmosphere where one can work with absolute commitment to the cause of neutrality as a constitutional value.

•At a time when India’s fall in ranks in the latest Democracy Index has evoked concern, it is expected that Parliament will pay heed to the reasoning of the Supreme Court and take steps to strengthen the institution of the Speaker.

📰 Fashioning the framework of a New India

A major solution to the present economic crisis is to go in for inclusive growth; it also means shared prosperity

•The Indian economy is going through a severe crisis: a slowdown as well as a structural crisis. In the words of the former Chief Economic Adviser, Arvind Subramanian, it is headed towards the ICU. Almost all sectors of the economy are in decline: the rate of growth of the national GDP has declined to 5.0%, and may go down further; the construction sector, one of the fastest growing sectors so far, is growing at 3.3% this year; agriculture is growing at 2.1% while the auto sector is declining continuously in absolute terms.

•The Micro, Small and Medium Enterprises (MSME) sector too has declined, in turn raising the burden of non-performing assets of the banking sector as well as non-banking financial institutions. Also, exports have been declining in recent years, raising the crisis of current account deficit. Credit from banking and non-banking sectors has been declining in the last few years; the Financial Stability Report of the Reserve Bank of India (2019) says that it is unlikely to increase in the next nine months.

Impacting the poor

•These developments have had an adverse impact on the bottom 30%-40% of the population. The incidence of absolute poverty, which has been falling since 1972-73, has increased to 30% (4% jump). As the Human Development Report (2019) has shown, more than 44% of the Indian population is under the multi-dimensional poverty line. The poorest 50% population at present owns only 4.1% of the national wealth, while the richest 10% people own 73% of the total wealth in India (Suisse Credit 2019). India has 15.2% population malnourished (women 15%) as against 9.3% in China. And 50% of the malnourished children in the world are in India. India’s global hunger rank has gone up to 112 while Brazil is 18, China is 25 and South Africa, 59. In the field of education as per a UN report (2015), overall literacy in India is 74.04% (more than the 25% are totally illiterate) against 94.3% in South Africa, 96.6% in China and 92.6% in Brazil. Almost 40-45% population is either illiterate or has studied up to standard 4. Given the quality of education in India, the overall population is very poorly educated, with the share of ‘educated unemployment’ rising by leaps and bounds.

•It needs to be realised that when exports are declining, the economy will have to depend on domestic demand for growth. It is no more feasible for the top 20-25% population to continue growing without depending on the demand from the bottom 40-45% population. There is thus a strong reason now for the economy to increase effective demand of this bottom 40-45% population at least to continue growing — to reach a $5-trillion economy by 2024.

Sub-optimal use of labour

•However, this crisis needs to be viewed differently: a major reason for the crisis is that the growth process has marginalised the bottom 40-plus% of the population in the sense that they do not get a fair share of the economic growth, and are more or less deprived of productive employment with a decent income. These people have been treated as beneficiaries to whom some cash/kind grants are thrown at, but they have not been used as active participants in the growth process. Their potential has not been promoted.

•Though the bottom population depends on the government for basic health and elementary education (and also for access to higher educational opportunities), the government spends just 1.4% of GDP on health (against the norm of 4-6% of GDP) and 3% of GDP on education (against the norm of 6-8% of GDP). As a result, these people are left hardly literate and sick, with poor nutrition and high morbidity. They are incapable of acquiring any meaningful skills or participating actively when new technology is spreading in the rest of the economy. This sub-optimal use of the labour force in the economy is not likely to enable India to achieve optimal growth with proper use of the national resources — the labour force.

All-encompassing growth

•One important lesson for policymakers is this: a major solution to the present crisis is to go in for inclusive growth. Here, inclusive growth does not mean only including all sections of the population in the growth process as producers and beneficiaries; it also means “shared prosperity”. Since India has already committed to sustainable and inclusive growth at the UN General Assembly, India is definitely obliged to implement inclusive growth. This should be our “New India”.

•Under the “New India” the main requirements are as follows: To start with, to improve the capabilities of the masses as well as their well-being by expanding productive employment opportunities for them. The main steps to expand productive employment for all in the economy should be made up of: a process of inclusion — expanding quality of basic health for all and ensuring quality education to all, which will by itself generate large-scale employment in the government; having a well-educated and healthy labour force will ensure high employability; such people will be able to participate actively in the development process; having a well-educated labour force will help start-ups and MSMEs, in turn triggering a cycle of more productive employment in the economy.

•This will also improve the global competitiveness of our production units. Employment guarantee schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) will also increase employment. Following the economic logic of R. Nurkse and A.O. Hirschman, assets generated under MGNREGA will expand capital formation in the economy, thereby raising the labour-absorbing capacity of the mainstream economy.

•Such a strategy has multiple advantages: First, it will raise incomes and the well-being of those who need it most urgently. Second, it will raise effective demand rapidly, which is so badly needed in the economy today to raise economic growth. Third, growth will be equitable and sustainable.

•The discussion had important implications for the Union Budget: need to raise expenditure on health to at least 5% of GDP and expenditure on education to at least 6% of GDP; to push up infrastructural development to enhance capabilities and opportunities of the masses and not just to promote corporate units; to promote agriculture by raising investment in agriculture and not just cash transfer (cash transfer provides relief to them no doubt, and does not raise productivity of agriculture which needs large public investment); and to facilitate credit flow particularly continuous working capital, to labour intensive sectors. Unfortunately, these steps are missing in the recent national Budget.

Public investments

•Finally, how does one raise resources to increase new public investments in the selected sectors mentioned above, especially when public revenue is declining and the claims on public resources are rising? One major strategy is to raise direct taxes, both capital tax and wealth tax. Our experience in the past has shown by following crony capitalism, i.e. providing tax cuts and extra incentives and concessions to the corporate sector, exports increased and also our national GDP no doubt. But this growth does not much percolate to the poor. This is because during the growth process due to special treatment to corporate sector, the political economy radically changed in favour of the rich who are never willing to be taxed to raise government revenue to a level that it is enough to promote the capabilities and the well-being of the marginalised and the excluded.

•On the other hand, the unholy alliance between the government and the corporate sector also does not allow them to worry about the poor. Consequently, taxing the rich has to be a major strategy to raise government revenue. Second, if the public expenditure on raising capabilities is treated as social investment rather than social welfare, policymakers will be willing to spend on this capital formation. And, finally, there was no sound economic reason to control fiscal deficit ratio. Sound macroeconomics never supports this.