📰 High Court stays Haryana’s 75% law for reservation to locals in private jobs
Industry bodies welcome order; State Government vows to ensure local employment.
•The Punjab and Haryana High Court on Thursday stayed the Haryana government’s law guaranteeing 75% reservation to locals in private sector jobs.
•The court of justice Ajay Tewari and justice Pankaj Jain, admitting multiple petitions against the implementation of the law - Haryana State Employment of Local Candidates Act, 2020, issued the direction to stay the law.
•“There were seven-eight petitions before the court surrounding law guaranteeing 75% reservation to locals in private sector jobs in Haryana. The court has admitted the petitions and stayed the law,” Tushar Sharma, counsel for one of the petitioners – Manesar Industrial Welfare Association, told The Hindu.
•Haryana Deputy Chief Minister Dushyant Chautala said the government would fight for the 75% reservation. “We will continue to fight for employment opportunities of Haryanvi youth #75%reservation,” he said in a tweet, after the court decision.
Industry bodies’ plea
•Three industry associations from Gurugram, Faridabad and Rewari had sought judicial recourse. They had submitted that the new law went against constitutional provisions and the basic principle of merit underpinning the private sector growth.
•On January 15, 2022, the government notified the “Haryana State Employment of Local Candidates Act, 2020”. The law provides for 75% of new employment for local candidates having salary of less than ₹30,000 a month in various privately managed companies, societies, trusts, limited liability partnership firms, partnership firms etc.
China's decision to field PLA Galwan commander as Olympic torchbearer angers New delhi; no diplomat will represent India at opening and closing ceremonies; DD cancels live telecast of ceremonies
•Terming China’s decision to field a People’s Liberation Army soldier involved in the June 2020 Galwan clashes as the torchbearer for the Winter Olympics Games in Beijing as “regrettable”, India announced a diplomatic boycott of the games just ahead of the opening ceremony on Friday. State broadcaster Doordarshan also announced it will not telecast the opening and closing ceremonies live, where India has one athlete, skier Arif Khan, participating.
•The decision came after Chinese media reports identified Qi Fabao, a PLA regiment commander who received military honours for the Galwan clashes, where he was injured, as one of about 1,200 runners bearing the torch at a relay in Beijing.
•China’s decision to field him and New Delhi’s announcement of its first ever political boycott of Olympic games, are likely to increase India-China tensions that have risen since PLA aggressions along the Line of Actual Control began in April 2020.
•India had earlier expressed support for the Beijing Olympics, even as more than a dozen countries, led by the United States, had announced a boycott of the games.
•“It is indeed regrettable that the Chinese side has chosen to politicise an event like Olympic,” said MEA spokesperson Arindam Bagchi, referring to the media reports. “The Charge d’Affaires of the Embassy of India in Beijing will not be attending the opening or closing ceremony of the Beijing 2022 Winter Olympics,” he added.
•The Indian Ambassador to China, Pradeep Kumar Rawat, whose appointment was announced in December, is expected to take charge in the next few weeks, and hence the Charge d’Affaires Acquino Vimal is the top diplomat in Beijing at present. Mr. Vimal and other officials had been expected to attend the ceremonial functions at the games, although the MEA had said no political or high level representation would be sent from Delhi.
•Prasar Bharti chief Shashi Shekhar Vempati also tweeted that “consequent to the announcement by the MEA”, Doordarshan’s sports channel would not telecast the Olympic ceremonies, as planned earlier.
•The Chinese decision to publicly honour the military commander for involvement in the deadly clashes in the Galwan valley, where 20 Indian soldiers, and at least four Chinese soldiers (far higher according to media reports) were killed, is seen as a deliberate insult to New Delhi, which came despite the fact that the Modi government had decided not to join western boycott calls over human rights concerns.
•In November 2021, External Affairs Minister S. Jaishankar had hosted a virtual Russia-India-China (RIC) trilateral meeting which issued a joint statement where they “expressed their support to China to host Beijing 2022 Winter Olympic and Paralympic Games.”
•Other countries including the U.S., Japan, Australia, United Kingdom and a number of European countries including Latvia, Lithuania, Denmark, the Netherlands, Sweden and the Czech Republic have announced their plans for diplomatic boycott: sending athletes and sports officials, but no diplomatic or political presence, in protest of China’s restrictions on its Uighur population in Xinjiang and other human rights abuses.
•Meanwhile Russian President Vladimir Putin, Pakistan Prime Minister Imran Khan, Presidents of five Central Asian republics Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan are due to attend the opening ceremony on Friday.
•Mr. Putin is also expected to hold a meeting with Chinese President Xi Jinping and in a statement ahead of Mr. Khan’s visit, the Pakistan Ministry of Foreign Affairs said that Mr. Khan would meet Mr. Xi and Chinese Premier Li Keqiang and conclude a number of bilateral agreements.
📰 A disjointed response: On crypto assets and regulation
Regulatory clarity on crypto assets should have accompanied the tax on traders’ profits
•One of the most striking moves in the Union Budget’s taxation proposals for 2022-23 is the introduction of a taxation regime for virtual digital assets — evolving manifestations of cryptocurrencies, codes and non-fungible tokens. Finance Minister Nirmala Sitharaman has proposed to tax all profits from transactions in such assets at 30% along with the applicable surcharge and cess, and a 1% tax to be deducted by buyers while trading in any virtual digital asset beyond a threshold. While the tax on profits will apply from April 1, 2022, which officials said will not preclude profits already booked before that date from the tax liability, the TDS provisions aimed at creating a transaction trail for the tax authorities, will kick in from July 1. While trading profits will be taxed at, according to crypto industry players, a higher rate compared to other jurisdictions, no deductions will be allowed on account of setting off losses from such trading or from any other capital losses. The only deduction permitted would be the cost of acquiring the asset. The term ‘property’ under the I-T Act is being expanded to include virtual digital assets so that such assets received as a gift shall be taxable except when received from relatives. However, the taxation regime by itself, Ms. Sitharaman has emphasised, does not grant legitimacy to the trade in these currently unregulated assets. A consultation process is underway, which will determine the legal position of such assets.
•This provides some relief for the growing flock of crypto investors. The Government may still not consider them fully legit, yet the tax regime indicates the hard option of an outright ban that was signalled in the nomenclature of a proposed crypto law last year is off the table. Listed first for Parliament’s monsoon session, then again in the winter, that legislation is also now off the agenda. All this time, India’s youth, who the Prime Minister worried were being lured by crypto players’ misleading ads, continue to be swayed, with no norms brought in place to rein in such ballyhoo, and no regulatory watch. Whether this case is different from collective investment and plantation schemes that were belatedly regulated is ponderable. The delay in arriving at a decision also pre-empts Indian start-ups and innovators from developing products and ideas that can be scaled up globally given the nature of these assets. In November, the Government had indicated a forward-looking approach to crypto market oversight. It is time those words are matched with a clear regulatory framework soon instead of ambiguous waffling and dithering.
📰 A border move that will only bolster China
The attempt to delink the strategically important area of Depsang from the ongoing Ladakh border crisis is worrying
•After the 1962 Sino-India War was over, the Indian Army was confronted with the problem of bodies of around 190 Indian soldiers lying in areas around 8 kilometres to 16 kilometres inside the Chinese 1960 claim line in Ladakh. Collecting the bodies of the fallen soldiers after the war through mutual consent is an established military practice, and the Indian Red Cross wrote to its Chinese counterpart in April 1963. The Chinese turned down the request, stating that the bodies had been properly buried, and there was no need to send any Indian parties into disputed areas. As most Indian soldiers were to be cremated, not buried, the issue was again taken up with the Chinese. In August, the Chinese agreed to carry out the cremation and hand over the ashes to the Indian Red Cross.
•When the Indian Red Cross requested that Indian representatives be present during the ceremony, the Chinese cancelled the arrangements altogether. In its memo on September 16, 1963, the Chinese Foreign Ministry accused the Indian government of trying to lay claim to these territories through this device.
•While cancelling these arrangements, the Chinese Foreign Ministry insisted that the Indians who died at their posts in Ladakh were ‘invaders’ and not defending their ‘motherland’. Earlier, after overcoming the stiff Indian resistance at Rezang La, memorialised in the Hindi film, Haqeeqat, and at Gurung Hill, the People’s Liberation Army (PLA) had buried the bodies of five Indian soldiers — wooden posts with the inscriptions in Chinese and English, ‘The Corpses of Indian Invaders’. The purpose of the elaborate exercise was to deny any legitimate Indian presence and claim over these areas in future negotiations. If Indian soldiers had died defending their motherland, then it was an area in Indian possession and control — that would belie the Chinese claim over the territories in Ladakh. Its efforts to create facts on the ground to bolster its ‘historical’ claim underline the extent of Chinese enterprise in asserting its territorial claims.
Delinking Depsang
•It thus comes as a surprise that in a recent television interview, the Indian Army Chief, General M.M. Naravane, argued that “out of the five or six friction points (in Ladakh), five have been solved”. ‘Friction point’ is an Indian euphemism for points of Chinese ingress into hitherto India-controlled territory in Ladakh, where this control is exercised by the Army and the Indo-Tibetan Border Police (ITBP) through regular patrols to the claimed areas. These ‘friction points’ are Depsang, Galwan, Hot Springs, Gogra, North bank of Pangong Tso, Kailash Range and Demchok. By asserting that only one of the friction points is remaining to be resolved — he was referring to Hot Springs or PP15, the only one discussed in the last round of talks with the Chinese — he implicitly ruled out Depsang as an area to be resolved. This attempt to delink the strategically important area of Depsang from the ongoing Ladakh border crisis is worrying. It may suit the domestic political agenda of the Narendra Modi government of proclaiming an early end to the crisis, but it has long-term strategic consequences for India.
•Depsang is an enclave of flat terrain located in an area the Army classifies as Sub-Sector North (SSN), which provides land access to Central Asia through the Karakoram Pass. A few kilometres south-east from the important airstrip of Daulat Beg Oldi (DBO), the Chinese army has blocked Indian patrols since early 2020 at a place called Y-junction or Bottleneck, denying it access to five PPs: PP10, PP11, PP11A, PP12 and PP13. A joint patrol of the ITBP and Army would patrol these five PPs approximately once a month. Y-junction is around 18 km on the Indian side of the Line of Actual Control, even though the Chinese claim line lies another five kilometres further west, to the east of Burtse town. Satellite imagery from November 2021 confirms Chinese deployments at the Y-junction: two PLA Ground Force camps with six infantry fighting vehicles split between two positions while a small Indian Army forward camp is stationed 1.2 km west of the Y-junction.
Stand-off in 2013 and patrols
•The Indian forward camp is the new patrol base, with a permanent patrol deployed there, that was created after a 22-day long stand-off at Y-junction in April 2013. Since then, it has observed and stopped Chinese patrols from moving further to the Indian side, but a PLA patrol had still managed to get up to around 1.5 km short of Burtse in September 2015. Essentially, till the current blockade, the Indian side was able to access the five patrolling points, asserting Indian control, while the PLA had been denied access to its claim line since the late 2000s. That status quo has been disturbed since early 2020.
•Since the Ladakh border crisis came to light in May 2020, a section of the security establishment has tried to bury any conversation about Depsang. Media reports attributable to ‘sources’ have labelled it a ‘legacy issue,’ suggesting that the crisis has continued since April 2013. The 2013 stand-off was resolved diplomatically after negotiations led to reversal of an Indian ingress and bunker construction on the Chinese side in Chumar, while the PLA stepped away from the Y-junction. Lt. Gen. K.T. Parnaik (retd.), the then Northern Army Commander, has confirmed “resort(ing) to a quid pro quo, as we did during the Depsang intrusion in 2013. Early response creates leverage.”
•Former Ladakh Corps Commander Lt. Gen. Rakesh Sharma (retd.) was categorical in asserting that “patrolling had continued, as planned, since [the] April/May 2013 stand-off” and “to now state that we were not able to reach our LOP since 2013 as [the] PLA was blocking our movement, is pure heresy”. The fact that specific major general-level talks for Depsang were held with the Chinese on August 8, 2020 proves that it is part of the ongoing crisis. A 22-day stand-off in 2013 generated much public and media outrage but a 22-month long blockade of patrolling rights in the same area now has been greeted with silence.
Depsang’s importance
•The Army has always identified Depsang plains as where it finds itself most vulnerable in Ladakh, devising plans to tackle the major Chinese challenge. SSN’s flat terrain of Depsang, Trig Heights and DBO — which provides direct access to Aksai Chin — is suited for mechanised warfare but is located at the end of only one very long and tenuous communication axis for India. China, in turn, has multiple roads that provide easy access to the area. This leaves SSN highly vulnerable to capture by the PLA, with a few thousands of square kilometres from the Karakoram Pass to Burtse, likely to be lost. Nowhere else in Ladakh is the PLA likely to gain so much territory in a single swoop.
•SSN lies to the east of Siachen, located between the Saltoro ridge on the Pakistani border and the Saser ridge close to the Chinese border. On paper, it is the only place where a physical military collusion can take place between Pakistan and China — and the challenge of a two-front war can become real in the worst-case scenario. If India loses this area, it will be nearly impossible to launch a military operation to wrest back Gilgit-Baltistan from Pakistan.
•Theoretically, Depsang is also seen as a viable launchpad for a mechanised force-based military offensive launched by India inside Aksai Chin, if the Army has to fulfil Union Home Minister Amit Shah’s parliamentary vow of getting back Aksai Chin from China.
Danger of delinking
•The biggest danger of delinking Depsang from the current border crisis in Ladakh, however, is of corroborating the Chinese argument, which invalidates the rightful Indian claim over a large swathe of territory. In sparsely populated areas like Ladakh, with limited forward deployment of troops, the only assertion of territorial claims is by regular patrolling. By arguing that the blockade at Y-junction predates the current stand-off — a ‘legacy issue’ that goes back years — the Chinese side can affirm that Indian patrols never had access to this area and thus India has no valid claim on the territory. Already living with the disadvantage of being a lesser power vis-à-vis China, this argument further weakens India’s hand during negotiations in Ladakh.
•This will be akin to Prime Minister Narendra Modi’s statement during the all-party meeting in June 2020 that no one had entered Indian territory, which ended up bolstering Chinese position during the talks. India cannot afford to repeat that blunder again and lose its land. As was demonstrated by China in the aftermath of the 1962 War, there should be no holding back in painstakingly asserting one’s claims when it comes to safeguarding the territory. Denial of truth for domestic political gains, in this case, will certainly be to the detriment of India’s strategic interests.
📰 Does the Budget deliver on reforms?
The government has focused more on providing private goods than on public goods
•Finance Minister Nirmala Sitharaman presented the Union Budget for FY2022-23 in Parliament on Tuesday at a time when the economy continues to recover from the pandemic. This is the ninth full Budget of the government under Prime Minister Narendra Modi which was elected to power in 2014 promising to deliver ‘minimum government, maximum governance’. In a conversation moderated by Prashanth Perumal J., Sanjeev Ahluwalia and Shruti Rajagopalan discuss how well the latest Budget delivers on that promise. Edited excerpts:
How well has this Budget delivered on the government’s original promise of ‘minimum government, maximum governance’?
•Sanjeev Ahluwalia: ‘Minimum government, maximum governance’ is a difficult objective to achieve in India, where the government is so prevalent at all levels of polity. I think a great deal of progress has certainly been made by the Modi government to formalise and measure improvements in governance. But whether or not this government pushes forward the agenda of ‘minimum government’ is a little more difficult to gauge because of the circumstances. There is a coordinated shift towards bigger governments across the world than you would have thought normal, say, a couple of decades back when deregulation was in vogue. Also, don’t forget that there is a great deal of increased protectionism across the world, not just in India. India is just following the trend and there are some geopolitical concerns that also feed into whatever actions thegovernment takes. We are continuing to take strides towards becoming a more private sector-oriented economy. Some legal changes have been made recently which aim to provide greater certainty to private investors. At the very least, there’s nothing in the Budget that detracts from what we have done in the past.
•Shruti Rajagopalan: I differ from Sanjeev on this. My version of ‘minimum government, maximum governance’ is to think about what the role of the state is. If I were to think about a minimum state, it would be some version of a night-watchman state, which provides public goods such as law and order and leaves the rest to the private sector. On this account, I have largely been disappointed with this government. Instead of providing public goods, the emphasis has been to provide private goods more efficiently. So, for instance, the emphasis has been to provide subsidised LPG and build toilets for certain groups. But these are not your classic public goods. Second, I don’t see a major rollback in economic controls, although I do think the government tries to streamline them. For instance, instead of going to multiple different windows to get your clearances, now you only need to go to one window or two windows. But that is still very much an attitude of the economics of control. Third, the idea of ‘minimum government’ would mean systematically rolling back the footprint of the public sector. But this government has simply not had a good record on disinvestment. Air India has been a big win in terms of privatisation. But largely, when it comes to the big promise that was made to privatise a lot of underperforming public sector organisations, I don’t see much headway being made.
The Finance Minister mentioned that thousands of laws and compliances have been either repealed or reduced over the last few years. What impact has this had on the ground?
•Sanjeev Ahluwalia: Along with the repeal of all these various constricting regulations, and the single-window approach, there has been a general trend of, for instance, criminalising what should be civil offences. But one of the great pushes that the government has been able to do is to digitise government processes. While there are privacy concerns, digitisation does facilitate easier clearances. It speeds up the process although there’s the risk of some environmental clearances being given without due consideration just to stick to the timetable. So, there are downsides and upsides to almost every intervention. But there is no doubt that a good successful effort is being made in making government processes available to the public, in making sure that the public is able to participate in those processes, and in making government interventions as painless as possible.
•Shruti Rajagopalan: Streamlined laws are better than non-streamlined laws. But let’s take labour law consolidation. There was a big fuss made by the government that it is going to streamline labour laws, and it’s going to be easier to hire and fire labour. Many different laws were streamlined into four, but there was no real change in the content of the labour laws themselves. Are firms better off when they need to look in four places for all the relevant rules as opposed to in 30 different places? Absolutely. But that’s not the only cost that a firm faces. The real problem is the way labour relations are controlled in India. The country makes it so costly to hire labour that firms simply don’t want to hire labour. We’ve either pushed hiring of labour to middlemen or into the informal market. Or we have pushed systems towards more capital-intensive rather than labour-intensive industry. My fear with the talk of streamlining and digitisation is that the effective control that the government has on private people contracting with each other is just too high.
•Second, even in all the streamlining, we end up criminalising most civil offences and we don’t have the state capacity to enforce these criminal penalties. So, what happens is you get a very discretionary state. There are going to be some very over-enthusiastic or politically opportunistic bureaucrats who are going to come down on some individuals with the full weight of the rulebook. And in most cases, non-enforcement or just looking the other way is the norm. Neither of those things bodes well for any sensible economic regime, which requires certainty and predictability. I don’t think this Budget has paid enough attention to that problem. So, while streamlining and digitisation are great, we need a moment like 1991, with a complete dismantling of government regulation.
How do you see the government’s approach towards cryptocurrencies in the Budget and the introduction of the digital rupee?
•Sanjeev Ahluwalia: People are making vast amounts of money out of cryptocurrencies, so the government wants a share of it. The lure of raising more revenue has forced the government to recognise that crypto exists. I think it’s a good thing for the government to have recognised a phenomenon that already exists, and try and tax it because it should be taxed, and hopefully the government will try and mainstream it. Digital currency is simply an efficiency-enhancing mechanism, where you reduce the cost of hard cash management and circulation and gradually shift towards settling payments digitally.
•Shruti Rajagopalan: I think in the process of making crypto income taxable, the government has let the cat out of the bag that it no longer intends to ban it. So, to that extent, this is a welcome move. My take has always been that, if it understands the underlying mechanism of blockchain technology, it would understand that it can’t be banned. So, you’d rather keep it integrated with the rest of the economy so that everyone can gain from it instead of driving it underground. Second, the government has capitalised on this moment to raise some tax revenue but I still think it needs to have some underlying policy framework for how it thinks about crypto because the original reason it wanted to ban crypto was that it’s too volatile. So, you have to choose: is it too volatile, in which case you have to carefully think about allowing losses to be carried forward along with taxing income, or do you want to capitalise on the profits? Either way, the policy has to be coherent.
•And regarding the digital rupee, I don’t see it as competing with other cryptocurrencies, in the sense of it being completely decentralised and no one individual or entity being able to control or increase the money supply. But I do think that if the government doesn’t have a coherent policy on the rest of the crypto market, that will kill the digital rupee before it’s born because nobody is going to invest in just the digital rupee without a really thick crypto market which has a large number of buyers and sellers.
•Last, it doesn't look like the Indian digital rupee is going to be the global standard in the crypto market. If India wants to prevent other countries like China from becoming dominant in that market, it should allow a very thick and vibrant crypto market with a lot of other cryptocurrencies which are not controlled by the government.
What do you think of the Finance Minister’s comment that public expenditure will “crowd in” rather than “crowd out” private investment? Also, what do you make of the Budget’s emphasis on Atmanirbhar Bharat?
•Sanjeev Ahluwalia: We are never sure of our domestic competitiveness and wary of the fact that our markets could be taken over by overseas competitors. So, while Atmanirbhar in its essence is meant to be self-reliance, a great deal of it right now is really just providing domestic protection as an incentive to investors who may want to shift their production processes from other locations in the world to India. So, Atmanirbhar is not really something that is seeking to enhance competitiveness, which is really the best way of becoming a resilient economy. It’s seeking more to provide the nascent industry argument that we need to protect domestic industry and protect MSMEs, which have been doing badly during the pandemic. I hope that once we get into more normal times, these domestic protection measures will be withdrawn gradually and we will open industry out to more competition.
•Regarding public investment crowding-in private investment, as a statement it sounds fine. Of course, if public investment was to produce better infrastructure and long gestation projects, that would be wonderful for the private sector. But if public investment is going to try and substitute for private goods production, then I don’t think we have the firepower for it. It would mean that we would, in the short term, be crowding out the private sector because we would be borrowing. Public schemes to de-risk private investments are more interesting.
•Shruti Rajagopalan: Atmanirbhar Bharat is protectionist. I don’t think it’s conducive to growth at all. A good growth statement would have been announcing a commitment to slowly reducing tariffs year after year and then reaching a particular target. The Modi government with the Atmanirbhar slogan and the ‘Make in India’ slogan is more protectionist than ever before. Plus, tariffs on capital goods basically increase the cost of everything else that’s produced in the economy.
•On your second issue of crowding out or crowding in, I have two points there. One, I think investments in health and education have been completely missing in this Budget. In fact, the outlays have actually reduced but those are the kinds of investments in standard public goods that have a long-run effect of crowding in other private investment. I think infrastructure investment is not the worst thing, but I don’t see the multiplier of attracting private investment to be that high. There is a second issue to consider. When the government is not able to raise enough revenue, and it commits to borrowing, it is in fact crowding out the private sector’s ability to cheaply borrow in the market. So, if you think of gross fixed capital investment as a whole, gross fixed private capital investment is just going to drop.
