📰 Supreme Court sets aside Madras High Court remarks on EWS quota
Supreme Court says the High Court overstepped jurisdiction, to hear pleas against quotas in all India quota medical seats
•The Supreme Court on Friday set aside a Madras High Court observation that the Centre ought not to have provided 10% reservation for economically weaker sections (EWS) of society in the all India quota medical seats without obtaining the express approval of the Supreme Court.
•The High Court’s remarks in August came while closing a contempt of court case filed by the DMK.
•“This observation has to be set aside because it has nothing to do with the contempt plea... The observation by the High Court was unnecessary for deciding the contempt,” Justice D.Y. Chandrachud, sharing a Bench with Justice B.V. Nagarathna, observed.
Not on merits
•However, Justice Chandrachud made it very clear that the HC’s observations were being set aside only because they were made while dealing with a contempt plea and had strayed outside its jurisdiction. The top court refrained from making any comment about the merits of the EWS quota issue.
•Instead, the court scheduled for October 7 a detailed hearing of a batch of petitions challenging the entirety of the Centre’s July 29 notification of 27% reservation for OBC and 10% for EWS in the NEET all India quota (AIQ) seats.
•The High Court had approved a July 29 notification of the Central government providing 27% reservation to OBC (Other Backward Classes) candidates for admission in central medical colleges under the AIQ.
•It, however, had said that the inclusion of a further 10% by way of vertical reservation for EWS would be impermissible until the top court approved it.
•The Centre had rushed to the top court on September 3 against the observation, saying: “It was unnecessary for the High Court to have gone into an evaluation of the July 29 notification...”
•“In a contempt case, the High Court went ahead and examines all other issues... We had started the process [the implementation of 10% EWS quota as per the July 29 notification]. But the HC observation made us stop,” Additional Solicitor General K.M. Nataraj, for the Centre, submitted.
•The quota covers undergraduate and postgraduate medical and dental courses, starting from the current academic year. The government believes the quota policy would help marginalised sections get better opportunities.
•Senior advocate Shyam Divan, for the petitioners, said the July 29 notification was unconstitutional.
•Senior advocate Arvind Datar, also for the petitioners, said the notification raises the question whether ₹8 lakh should be the criteria for considering the EWS category.
•The petition also said it has to be examined whether there would be vertical or horizontal reservation. Mr. Datar said the such quota sucks away over 2,500 seats from the general category.
•The petitioners contended that the selection process had already begun for the academic year and cannot be interfered with. The implementation of the quota policy now would cause grave injustice, they contended.
•Senior advocate Kapil Sibal, for Tamil Nadu, said the question of the EWS quota is pending before a Constitution Bench. He made a subtle point that the EWS has national ramifications and all the States should be heard by the court.
•Senior advocate P. Wilson, for DMK, said it was the party’s petition that made reservations in All India Quota seats across the country.
PBOC fears crypto will pave way for fraud, money laundering
•China’s central bank on Friday said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for the digital trade in China after a crackdown on the volatile currencies.
•The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations, which have sought to prevent speculation and money laundering.
•“Virtual currency-related business activities are illegal financial activities,” the People's Bank of China (PBOC) said in an online statement on Friday, adding that offenders would be “investigated for criminal liability in accordance with the law”.
•The notice bans all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives and “illegal fundraising”.
Widespread fraud
•The People’s Bank of China said that in recent years, trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities”.
•This was “seriously endangering the safety of people's assets,” the PBOC said.
•While crypto creation and trading have been illegal in China since 2019, further crackdowns this year by Beijing warned banks to halt related transactions and closed much of the country’s vast network of bitcoin miners.
•The crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions.
📰 Complex count: On caste census
A precise caste census is difficult, but the data will be useful to drive social policy
•The idea of a national caste census might be abhorrent when the stated policy is to strive for a casteless society, but it will be useful to establish statistical justification for preserving caste-based affirmative action programmes. It may also be a legal imperative, considering that courts want ‘quantifiable data’ to support the existing levels of reservation. Political parties with their base in particular social groups may find a caste enumeration useful, if their favoured groups are established as dominant in specific geographies; or they may find the outcome inconvenient, if the precise count turns out to be lower and has a negative bearing on perceptions about their electoral importance. In this backdrop, the Union government’s assertion in the Supreme Court that a census of the backward castes is “administratively difficult and cumbersome” may evoke varying responses. There are two components to the government’s stand. First, it asserts that it is a policy decision not to have caste as part of the regular census and that, administratively, the enumeration would be rendered so complex that it may jeopardise the decennial census itself. Second, it cites the difficulties and complexities inherent in getting an accurate count of castes, given the mind-boggling numbers of castes and sub-castes, with phonetic variations and similarities, that people returned as their caste in the Socio-Economic Caste Census (SECC) conducted in 2011.
•The Government has said data from the 2011 SECC were not acted upon because of “several infirmities” that rendered them unusable. Even in the Censuses up to 1931, when caste details were collected, they were wanting in completeness and accuracy. Further, the data contained 46 lakh different caste names, and if subcastes were considered, the ultimate number may be exponentially high. These points do merit consideration, and even those clamouring for a caste census cannot easily brush them aside. However, these need not mean that an enumeration of the social groups in the country is impossible. A caste census need not necessarily mean caste in the census. It may be an independent exercise, but one that needs adequate thought and preparation, if its ultimate goal is not for political or electoral purposes, but for equity in distribution of opportunities. A preliminary socio-anthropological study can be done at the State and district levels to establish all sects and sub-castes present in the population. These can be tabulated under caste names that have wider recognition based on synonymity and equivalence among the appellations that people use to denote themselves. Thereafter, it may be possible to do a field enumeration that can mark any group under castes found in the available OBC/BC lists. A caste census may not sit well with the goal of a casteless society, but it may serve, in the interim, as a useful, even if not entirely flawless, means of addressing inequities in society.
📰 India is not a bystander in the AUKUS saga
Observers in New Delhi profess mixed feelings — some joy for Australia, but more commiseration with France
•The announcement last week of AUKUS — a new security pact between the United States, the United Kingdom and Australia — is making waves around the world. The announcement is significant not only because it involves the transfer of nuclear submarine technology to Australia but also since it implies the cancellation of an ongoing U.S.$90 billion project by France to manufacture conventional submarines for Australia.
•Understandably, France is indignant. Paris has recalled its Ambassador to Australia, accusing Canberra of “backstabbing” and betrayal. When Australian and French Ministers met less than a month ago, French officials said there had been no talk of cancelling the deal. The two sides had even issued a joint statement indicating the continuation of the submarine programme. But Australia, it seems, had been secretly negotiating a deal with the U.K. and the U.S. Beyond Canberra’s unceremonious termination of the submarine contract, France is angry because it was kept in the dark about the discussions surrounding the new pact.
•For observers in India, the AUKUS saga evokes mixed feelings. Many are happy for Australia — a partner in the Quad (of India, the U.S., Japan and Australia) — to receive top quality nuclear submarine technology from the U.S. and the U.K., strengthening China deterrence in the Indo-Pacific. But there is no mistaking a sense of commiseration with France, India’s foremost partner in the Indian Ocean. “Why couldn’t France have been taken into confidence,” many ask. “It would have prevented an unseemly spat between friends, all big players in the Indo-Pacific region.” Some Quad-sceptics see this as a sign of what the future might hold for India. If Australia and the U.S. could deceive France, a North Atlantic Treaty Organization (NATO) partner, they ask, what is to prevent them from doing the same with lesser allies?
New Delhi is uncomfortable
•There is another reason why Indian officials are seeing this differently. There is apprehension that the deal could eventually lead to a crowding of nuclear attack submarines (SSNs/submersible ship nuclear) in the Eastern Indian Ocean, eroding India’s regional pre-eminence. The Indian Navy presently dominates the space, but its conventional underwater capability has been shrinking. An Indian plan to develop a fleet of nuclear attack submarines has elicited no offer of help from the U.S. that does not share its prized nuclear submarine technology with even its closest allies; all except Australia, evidently. Washington’s willingness to help Canberra build SSNs raises the possibility that Australia could deploy nuclear submarines in the Eastern Indian Ocean well before India positions its own. This is not merely hypothetical. The Indian Navy, the principal security provider in the Eastern Indian Ocean, is not building submarines at a pace commensurate with needs. Notwithstanding shared concerns over China’s growing submarine presence in the region, however, Indian officials are not comfortable with the prospect of friendly SSNs in India’s backyard.
AUKUS versus the Quad
•It does not help that AUKUS has taken the focus away from the Quad. Regardless of how the Joe Biden administration frames the argument, there is no denying a sense of wariness in New Delhi. There is for one thing more than a subtle hint of U.S. favouritism for Australia in the new deal. The agreement suggests preferential treatment on the part of Washington for a close Anglo-alliance partner. A senior American official who briefed the media about the AUKUS deal last week underscored the “very rare” nature of the arrangement and the “extremely sensitive” technology that will be shared with Australia. “This is an exception to our policy in many respects,” he observed. “I do not anticipate that this will be undertaken in any other circumstances going forward; we view this as a one-off.” That leads some in Delhi to wonder why the U.S. should make an allowance for one Quad partner and not another.
The technology pursuit
•While it has rarely received any submarine technology from the U.S., New Delhi has been accepting of American discretion on the matter. India has instead relied on Russia for nuclear submarine technology, including in the construction of the reactor of India’s first SSBN/submersible ship ballistic missile nuclear (Arihant) and in the acquisition (on lease) of a nuclear attack submarine. The Indian Navy’s indigenous SSN programme, however, requires a nuclear reactor more powerful than the one installed in the Arihant (a non war-fighting platform). Following the deepening of Quad ties, some in India were hopeful that the U.S. would consider providing the Indian Navy with nuclear submarine propulsion technology. The clarification by Washington that the deal with Australia is a “one-off” puts paid to Indian expectations.
•There is now speculation that Delhi might consider seeking French help with nuclear submarines. There is a view that New Delhi must seize the opportunity to push France to transfer its nuclear propulsion technology. Despite the less than satisfactory experience with the Project 75 ‘Scorpene’ class submarine programme, India, some say, should accept French assistance with building an SSN reactor.
•For the moment, however, India is being careful in its official response to AUKUS. The bottom line for New Delhi is that it cannot be seen to be taking sides in a feud among friends. France, the U.S., the U.K. and Australia are some of India’s closest partners, and Indian officials would like to be spared the awkwardness of having to support one ally over the other. Despite worries over the prospect that Australia’s nuclear submarine capability could overtake India’s own in coming years, Indian officials recognise Canberra’s need to reappraise its strategic environment and reinforce deterrence against China.
•Likewise, many in New Delhi feel France’s anguish. The deal Australia just cancelled was a critical part of France’s struggle to maintain an indigenous naval industry, and a key component of its Indo-Pacific vision. India, by some accounts, would like to deepen bilateral strategic ties, and play a part in restoring French confidence and pride.
📰 When global firms disengage, employment suffers
While inward FDI in India does create jobs, the magnitude and quality of job generation need scrutiny
•The most recent labour statistics, for August 2021, released by the Centre for Monitoring Indian Economy (CMIE) shows that the unemployment rate has increased from around 7% in July to 8.3% for August 2021. In absolute terms, employment shrunk from 399.7 million in July to 397.8 million, that is, 1.9 million jobs were lost in one month.
•Sectoral analysis shows that most of the jobs lost were farm jobs; while non-farm jobs did increase to absorb some of these, the quality of new jobs generated is a matter of concern. While employment in agriculture fell by 8.7 million, non-farm jobs increased by 6.8 million, mainly in business and small trade, but the manufacturing sector shed 0.94 million jobs. Thus, much of the labour shed by agriculture has been absorbed in low-end service activities.
Employment sustainability
•During normal times, seasonal labour released from agriculture gets accommodated in the construction sector, even though the ideal situation would be their movement to the factory sector. But, currently, the construction sector itself is shedding jobs, forcing workers to find employment in the household sector and low-end services. This non-availability of sufficient jobs in manufacturing and higher end services could be the dampener for economic recovery in the subsequent quarters of the current fiscal year.
•Elementary economic theory suggests that raising the level of investments is the key to output and employment growth. While public investments are important, especially in the current context of sluggish aggregate demand, there is a dire need to complement public investments with even more private investments. The economy has been waiting for private investments to flow in for quite some time, but their levels have been very low, accentuating the unemployment situation. Resorting to Foreign Direct Investment (FDI) to augment domestic capital formation is an approach that India has been pursuing by making ‘ease of doing business’ more enticing. While inward FDI does generate jobs both directly and indirectly through an increase in production activities (which increases demand for labour), the magnitude of employment generated especially in the manufacturing sector, needs closer scrutiny. Further, the sustainability of increased employment is often threatened as it depends on the business avenues which other competing economies open up leading to corporate restructuring at the global level and firm exits from erstwhile locations.
An exit and disruptions
•Tepid employment growth in the manufacturing sector is not a recent phenomenon in India. However, some sub-sectors within the manufacturing sector have generated both direct and indirect employment by attracting FDI and entering into global networks of production. A prominent segment, often projected as a driver of the manufacturing sector’s output and employment growth, is the auto sector.
•Estimates show that the automobile sector employs 19.1 million workers, directly and indirectly. Currently, more than 70% of the auto component companies are small and medium enterprises. It was expected that by 2022, the employment in this sector would reach 38 million with a higher generation of indirect employment.
•However, three factors have created roadblocks to the expansion of the sector. First, due to the novel coronavirus pandemic and subsequent lockdown, aggregate demand in the economy is low, which is being reflected in vehicle sales. Second, the shortage of semiconductors continues to impact production even when customer sentiments are slowly turning positive. Third, the recent exit of Ford from the Indian market would release a large number of employees, who would be in search of jobs that are hard to find.
•The exit of Ford raises some important issues regarding the unbridled attraction of FDI. While FDI might help in creating a manufacturing ecosystem in certain locations, the uncertainties of global corporate restructuring and changes in the economic environment in the lead firm’s home economy are factors to reckon with. More frequent global production re-arrangements are becoming a part of the strategy of big firms in this phase of globalisation, as markets tend to be more volatile due to repeated demand fluctuations.
Other examples
•We have had the experience of Nokia, which at its peak, in its Sriperumbudur factory (Tamil Nadu) was one of the world’s largest mobile phone plant, with 8,000 permanent employees working three shifts, producing more than 15 million phones a month and exporting products to over 80 countries. But in 2014, Nokia halted its production operations from this location, disrupting the livelihoods of thousands of workers.
•Recently, Citibank announced that it would shut India retail banking business as part of a global decision to exit 13 markets. The U.S.-based bank wants to focus on a ‘few wealthy regions’ around the world. Citibank’s exit from the retail segment is after more than three decades; the bank has 35 branches employing approximately 4,000 people in the consumer banking business. Closely following this, after 25 years of operations is auto manufacturer Ford deciding to exit India. This will affect about 4,000 direct employees as it stops making cars at its factories in Sanand, Gujarat, and Chennai, Tamil Nadu. Estimates show that another 35,000 indirect employees would also be lost at various levels, creating a massive disruption in the local economy.
Impact on job generation
•The exits of high-profile global firms affect employment generation in two ways. First, it creates apprehensions among potential investors about choosing that location for greenfield investments or for scaling up existing facilities. Such circumstances generally lead to a ‘wait and watch’ approach, affecting private investments even if an economy claims to have the tag of investor friendliness. A downturn in private investments leads to slower employment growth. Second, the process of the ‘destruction’ of jobs through exits creates mismatches in the labour market. That is, there is a sudden release of high skilled workers which could block possible new entrants who have already invested in their skills; this leads to a levelling down of wages which occurs when high-end services firms exit. When large assembly firms exit there would be a big influx of low-skilled workers to other sectors as the same sector might not be able to absorb the workforce released. This churn in the labour market aggravates an existing unemployment problem.
A waning of permanency
•The euphoria on the inflow of FDI and associated benefits needs to be tempered with the reality of the emergence of modern transnational corporations (TNC) with ‘agility, rapidity and mobility’. When these TNCs emerge as key players in an industry, a proliferation of mergers and consolidations across national and international borders might be frequent. These are efforts to open up new opportunities in new markets. Such waves of expansions and contractions are aimed at acquiring new markets and new trade opportunities. This process of an internationalisation of production is driven by the big firms by investing in and out of developing economies.
•Growing scepticism towards more open trade policies and the rise of protectionism have increased the risk and unpredictability of policy environments, leading to deeper reflection on both existing and new investments by global firms. Thus, the ‘next to near’ permanency of large foreign firms operating for decades is slowly waning. It is here that domestic capital formation and private investments should step in. We are still waiting for it to happen.
