News & Events
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1.Your ration, their fight. Delhiites deserves better
The AAP government is very keen on providing doorstep delivery of ration in the capital, while BJP spokespersons say the scheme is a scam. This would be the normal government-opposition tit-for-tat in other states. But in Delhi the passage of the Government Of National Capital Territory Of Delhi (Amendment) Act 2021 complicates matters, worsening normal governance obstacles into hopeless roadblocks as well as alibis for inaction.
In Covid times there is a strong case for home delivery of public goods ranging from food to vaccines, especially where state governments are so inclined. As CM Kejriwal dramatically asks, “If pizza, burgers, smartphones and clothes can be delivered at home, why not ration?”
The core problem is obviously much more wide-ranging. Delhi’s elected government is seriously hamstrung in exercise of its powers. A corollary is that from shortfalls in oxygen and vaccines to municipal maintenance, it can pass the buck to the Centre. The Lieutenant Governor has been armed with powers to stymie the elected government but without any commensurate accountability to the electorate. At a time when governance needs to raise its game to deliver to a historic crisis and needs, this divided state of affairs is really hurting Delhi’s people. It needs revision and correction.
2.For better tax rules: Make tech majors pay their fair share, lower rates for domestic companies
G7 countries’ agreeing to a global minimum corporate tax rate of 15% and the rule that MNCs, irrespective of the nature of their business, have to pay taxes where they operate, are pathbreaking proposals. They put on notice both tax havens, a list that includes countries like Ireland and China’s Hong Kong, as well as global technology behemoths like Google’s parent Alphabet, Facebook and Amazon. These MNCs, in part taking advantage of businesses built on digital platforms, create a maze of subsidiaries and park most of their revenues in tax havens, denying governments of major markets taxes and putting companies which duly pay taxes at a great disadvantage.
G7’s agreement should be followed through quickly by, first, G20’s agreement and, second, framing the rules of the new system. G20 members should persuade China, which may be concerned about Hong Kong, that it will gain far more than it will lose under the new system. India, a G7 invitee and a G20 member, of course has much to gain. As one of the world’s largest internet markets by size, and one in which the average value of transactions will go up rapidly, India loses out badly when these technology MNCs escape the corporate tax net. Taxes like the equalisation levy and the concept of ‘Significant Economic Presence’ introduced in IT rules are correct steps, but they don’t compensate for revenue lost under the current regime.
India should boldly undertake another corporate tax reform – lower domestic rates significantly. In fact, India’s rate for taxing companies should be the global minimum – 15%. In September 2019, GoI had slashed corporate taxes to 22% in general and to 15% for greenfield manufacturing companies. With cess and surcharge, the effective tax rate for existing domestic corporates is roughly 25.17%. But covid has radically changed ground realities. Private investment, slowing down even before the pandemic, needs a huge incentive. Any loss in revenue will be more than made up by taxes on activities generated by higher private investment. A 15% corporate tax rate will make India the most attractive tax-wise in Asia. Such a rate will also compensate for India’s disadvantages vis-à-vis its peers – higher business compliance costs, poorer infrastructure, slower legal system. Along with current incentives for manufacturing like the PLI scheme, a 15% rate has the potential to make this country a manufacturing giant. Let’s remember, sustained private investment and industrial employment are the only sure shot means to make India richer.
3.Media and sedition: On Supreme Court relief to journalists
The Supreme Court’s rulings on cases of sedition give hope the law will be re-examined
It has long been recognised that strident criticism of government will not amount to an attempt to excite disaffection and disloyalty towards government. Yet, the archaic and colonial view that an intemperate attack on an incumbent ruler should be met with fierce prosecution for sedition prevails among many in power even today. In a significant judgment, the Supreme Court has quashed a criminal case registered in Himachal Pradesh against journalist Vinod Dua by invoking the narrowed-down meaning of what constitutes an offence under Section 124A of the IPC, the provision for sedition, set out in Kedar Nath Singh (1962). Every journalist, the Court has ruled, is entitled to the protection of that judgment, which said “comments, however strongly worded, expressing disapprobation of actions of the Government, without exciting those feelings which generate the inclination to cause public disorder by acts of violence, would not be penal”. The law on sedition has come a long way from the formulation of British-era judges Comer Petheram and Arthur Strachey that “feelings of disaffection” towards the government connote “absence of affection… hatred, enmity, dislike, hostility… and every form of ill-will towards the government” to the more rational reading that only a pernicious tendency to create public disorder would be an offence. Yet, it appears that every generation needs a judicial iteration of this principle, and that is because of two reasons: that Section 124A remains on the statute book and that powerful political figures and their minions are unable to take criticism in their stride.
Enacted to put down journalistic criticism of the colonial administration from an increasingly vocal press, Section 124A is essentially a provision which seeks to protect the government’s institutional vanity from disapprobation using the interests of public order and security of the state as a fig leaf. It has often been criticised for being vague and “overbroad”. Its use of terms such as “bringing (government) into hatred or contempt” and “disloyalty and all feelings of enmity” continues to help the police to invoke it whenever there is either strong criticism or critical depiction of unresponsive or insensitive rulers. The explanation that disapproval of government actions or measures with a view to altering them by lawful means will not amount to an offence is not enough to restrain the authorities from prosecution. The mischief lies in the latitude given to the police by an insecure political leadership to come down on the government’s adversaries. It is unfortunate that the Bench did not go into the aspect of political motivation behind the police registering FIRs without checking if the required ingredient of incitement to violence is present. The Court’s verdict brightens the hope that the section’s validity will be re-examined. For now, it is a blow for free speech and media freedom.
4.Diminishing options: On RBI’s June 2021 policy statement
The RBI has little room to use interest rates for achieving policy outcomes
The RBI’s latest policy statement underscores the diminishing options available to it to address the economic fallout from the COVID-19 pandemic. The bank’s Monetary Policy Committee left benchmark interest rates unchanged for a sixth straight meeting and reiterated that it would keep its policy stance accommodative ‘as long as necessary to revive and sustain growth on a durable basis’. Since its May 2020 decision to cut interest rates by 40 basis points, taking the cumulative reduction in borrowing costs in the wake of the pandemic’s onset to 115 basis points, the MPC has found itself in a bind. While the first lockdown constricted supply and demand for much of Q1 of the last fiscal, pushing the economy into a record 24.4% contraction during April-June and causing full-year GDP to shrink 7.3%, the second wave has crushed all-round demand and consumer confidence. The RBI’s May round of the consumer confidence survey shows the Current Situation Index at a new all-time low, with 75% of households perceiving the economic and employment situations as having worsened further, and the future expectations index reflecting overall pessimism. It is hard to see the mere availability of low-cost credit helping revive the all-important consumption demand.
The MPC acknowledged the bleak outlook when it slashed its projection for Q1 growth by as much as 770 basis points to 18.5%, from the 26.2% it had forecast just on April 7. Banking more on optimism than hard data, the panel bumped up its growth estimates for the second half resulting in an overall cut of only one percentage point to its full-year growth forecast at 9.5%. For this, it has assumed rural demand will remain buoyant on the back of an expected normal monsoon, while noting that widespread infections in rural areas, which likely led to a sequential decline in tractor and two-wheeler sales in April, could undermine future demand. The other factor the RBI is banking on to provide a fillip to economic activity is an accelerated pace of vaccinations, over which it has virtually no control. To be fair, Governor Shaktikanta Das has used the bank’s liquidity spigot as a tool to address some of the economic distress. A series of measures focus on bolstering credit flow to the hardest hit MSME and contact-intensive industrial and services sectors, respectively. Still, the MPC can ill-afford to drop the ball on its primary remit — ensuring inflation remains anchored. With international commodity prices, including crude oil, on an upward trajectory and no signs of domestic policy support to check skyrocketing petrol and diesel pump prices, inflation is sure to accelerate, posing a major conundrum to the RBI. Raising rates could risk hurting recovery, and not doing so could heighten inflation.
5.The dynastic turn in TMC
While there are complex factors behind the resilience of dynastic politics — the brand recall value of leaders, a quicker route to mass legitimacy, control over finances — it leaves Indian democracy poorer. Ms Banerjee has followed, rather than led, this time around.
With the appointment of West Bengal chief minister Mamata Banerjee’s nephew, Abhishek Banerjee, as the party’s all-India general secretary, yet another regional party in India has formally taken the dynastic route to political leadership. Mr Banerjee, a Member of Parliament, has been the de facto number two in the Trinamool Congress (TMC) for some years now; he also played a key role in the election campaign of 2021, bringing in consultant Prashant Kishor to the aid of the party after the 2019 Lok Sabha election debacle. But the de facto has now become de jure — and the line of succession in the TMC is clear. Ms Banerjee’s chosen heir is Mr Banerjee.
The episode throws up a larger question about the resilience of dynastic politics — where the bloodline determines political leadership. This is not just true for the Congress nationally, but the entire gamut of regional parties. In the Dravida Munnetra Kazhagam, MK Stalin succeeded M Karunanidhi. In Shiv Sena, Uddhav Thackeray took forward Bal Thackeray’s legacy, though he has moved it in a different direction. In the Rashtriya Janata Dal, Tejashwi Yadav has emerged as the clear leader with his father, Lalu Prasad, out of political action due to corruption cases and ill health. In the Samajwadi Party, Akhilesh Yadav fought a bruising battle with his uncle and even engaged in shadow-boxing with his father, but established his control. In the Bahujan Samaj Party, Mayawati’s nephew is assuming a greater role. The Abdullahs control the National Conference, and in Peoples Democratic Party, the Mufti’s death saw his daughter Mehbooba Mufti take over the party. The Indian National Lok Dal is the party of the Chautalas; Chandrababu Naidu is grooming his son to take over the Telugu Desam Party; Jagan Mohan Reddy built on his father’s legacy to create the YSR Congress Party; the Pawar family runs the Nationalist Congress Party; and Chirag Paswan has taken over the Lok Janashakti Party.