Editorial 1: States and the Centre’s fetter of ‘net borrowing ceiling’

Context

The Centre’s NBC step and, subsequently, Kerala’s move to approach the higher judiciary on the issue, highlight the need to revisit Article 293 of the Constitution.

Introduction

The central government, in 2023, imposed a ‘Net Borrowing Ceiling’ (NBC) on the State of Kerala to restrict the maximum possible borrowing that the State can make under the law. This ceiling is 3% of the projected Gross State Domestic Product (GSDP) for FY2023-24. The NBC now encompasses all borrowing avenues, including open market loans, financial institution loans, and liabilities from the public account of the State. Furthermore, to stop States from circumventing the borrowing cap through State-owned enterprises, the ceiling has been extended to cover certain borrowings by these entities as well.

• Impact on Kerala's financial position: This has been a huge blow to the financial position of the State, with Kerala finding it difficult to meet its expenditure.
  • In addition, this has restrained the State from investing further in developmental and welfare activities.
• Political and legal controversies: It has also ignited political and legal controversies which have created an incompatible situation between the Centre and the State.
• Constitutional issue and legal action: Kerala approached the Supreme Court of India on the issue of the encroachment on the executive power that is conferred on the State under Article 293 of the Constitution of India to borrow on the security and guarantee of the Consolidated Fund.
  • The State has alleged that the State’s fiscal autonomy, as guaranteed and enshrined in the Constitution of India, has been illegally curtailed by the Centre.
• Historical significance: This has been the first case in the history of the Court wherein Article 293 has come up for interpretation.

Borrowing powers and provisions

• Chapter II of Part XII of the Constitution deals with the borrowing powers of the Centre and States.
• Article 292 speaks about the borrowing power of the central government which entitles the central government to borrow loans upon the security of the Consolidated Fund of India.
• Article 293 empowers the State government to borrow within the territory of India upon the security of the consolidated fund of the State.
  • In both cases, the extent of borrowing may be fixed from time to time by a law enacted by Parliament and the State legislature, respectively.
• As in Article 293(2), the Government of India may grant loans to any State subject to conditions laid down by any law made by Parliament up to the limits fixed under Article 292.
• Conditions for loans and guarantees: The central government can also provide guarantees upon the Consolidated Fund of India in respect of loans raised by any State.
• Article 293(3) imposes a restriction on the State government if the repayment of loans or a guarantee which has been given by the Government of India (if taken by the predecessor government is still outstanding).
  • In such a case, the consent of the central government is essential to raise such a loan.
  • The central government is afforded broad discretion over “consent” by specifying that it may be granted subject to any conditions as the Government of India deems appropriate.

Adoption of Article 293 of the Constitution

• Adoption: from Section 163 of the Government of India Act, 1935.
• Constituent Assembly Debate (August 10, 1949): In the Constituent Assembly, while Article 293 (draft Article 269) was debated on August 10, 1949, a member, Ananthasayanam Ayyangar, noted that the issue of borrowings and loans requires greater scrutiny as borrowing imposes heavy obligations on not only the present generation but also future generations.
  • He suggested that a commission akin to the Finance Commission may be constituted.
• Section 163(4) of the Government of India Act, 1935 stated that while exercising the power conferred under Section 163(3) regarding ‘consent’, the Federation shall not refuse or make unreasonable delay in granting the loan or providing guarantee, or impose any unreasonable conditions when sufficient cause is shown by the provinces.
  • If any dispute arises out of the matter stated it was to be referred to the Governor-General whose decision shall be final.
• The clause was not adopted as this provision was included in the Government of India Act, 1935 as it expected that a different agency that was not a national of India would be in charge of the administration.
  • But after the Independence, it was felt that such a provision was not necessary as State governments replaced the provinces and a national government was established at the Centre.

Eliminating revenue shortfall

• Enactment of the FRBM Act, 2003: To implement the mandates in Article 292, the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted to maintain financial restraint by establishing goals such as the elimination of revenue shortfall and the reduction of fiscal deficit.
• Target for Fiscal Deficit: To eliminate the revenue shortfall and the budgetary deficit, a target of 3% of GDP is established for the Centre’s yearly fiscal deficit ratio (FD).
  • As in the Centre’s directives, States enacted their own pieces of legislation to control their fiscal deficit.
• FRBM Amendment Act, 2018: The FRBM Amendment Act, 2018 required the central government to ensure that the fiscal deficit did not surpass 3% of GDP and that the total public debt did not surpass 60% of GDP.
  • By 2025–26, the government expects to reduce the fiscal deficit to less than 4.5% of GDP.
• Impact on State Autonomy: The Centre’s restriction on the borrowing limits of the States so as to attain fiscal consolidation by restricting the fiscal deficit, and without considering the financial position of States, is an encroachment of the autonomy of States.
  • It also lowers their ability at budget balancing.

What is the Supreme Court Case view on the borrowing powers?

• The issue of the borrowing power of States guaranteed under Article 293 of the Constitution is before the Supreme Court in the case filed by the State of Kerala.
• As the interpretation of Article 293 of the Constitution of India raises key questions about fiscal decentralisation, State fiscal autonomy and past borrowing practices, the Court has referred the issue of a State’s borrowing powers to a Constitutional Bench.
• The matter also touches on whether the fiscal regulations imposed by the Centre have negatively impacted the Reserve Bank of India’s control over fiscal consolidation.

Why is there a need for revisiting Article 293?

• Contemplating the transforming economic, political, and fiscal landscape in India, it is time to revisit Article 293 of the Constitution.
• Section 163(4) of the Government of India Act, 1935 warns the unnecessary refusal or delaying or the imposing of conditions in granting loans by the Centre.
• Similarly, a remedial measure, as mentioned in Section 163(4), could have been adopted in the Constitution when a dispute arises.

Way Forward: There is a need to strengthen this Article

Article 293 of the Constitution must be strengthened in the following manner.

• Strengthening Article 293 of the constitution: As suggested by Ananthasayanam Ayyangar, a commission akin to the Finance Commission is essential to decide any issues that may arise regarding the approval of a loan upon considering the financial position of States as well as the Centre’s goal of limiting fiscal deficit.

• Need for proper guidelines: There must be proper guidelines which are to be adhered to when the Centre exercises the wide powers granted under Article 293(4) of the Indian Constitution —
  • crucial in maintaining a balanced fiscal framework between the Centre and the States, and
  • which enhance cooperative federalism.
  • Otherwise, there could be arbitrary decision-making that may disrupt fiscal discipline, leading to either unchecked borrowing or overly restrictive conditions.
• Guidelines for exercising powers under Article 293(4)
  • Transparency in decision-making thereby ensuring that the procedures and standards for accepting or rejecting governmental borrowings are transparent to the public;
  • Having a consultative process, where there is consultation with State governments before prescribing any terms or limitations on borrowing which enhances cooperative approach;
  • Ensuring equitable treatment where there an employment of borrowing terms and restrictions applied uniformly for all States to eliminate prejudice or favouritism;
  • An admiration for fiscal autonomy, ensuring that there is financial autonomy for a State, the restrictions are reasonable and do not unduly hamper a State’s ability to manage its finances effectively.

Conclusion

Adhering to these guidelines can ensure that the Centre’s powers under Article 293(4) are exercised fairly, transparently and in a manner that supports balanced fiscal management and cooperative federalism. It is also essential a designed approach to borrowing powers, promoting transparency, fairness, and cooperative federalism, while safeguarding states' fiscal autonomy and encouraging sustainable fiscal management across the nation.

Editorial 2: Calling out exploitative labour dynamics on platforms

Context

India’s first nationwide digital strike that was organised by women gig workers is an attempt to mainstream their work issues.

Introduction

In the midst of the continuous evolution of the concept of “gig workers”, there was a groundbreaking movement in India recently — a nationwide digital strike this Deepavali that was organised by women gig workers. This was a call made by the Gig and Platform Services Workers Union (GIPSWU), India’s first union that is dedicated primarily to women gig workers. The strike sought gig worker and service user solidarity across the country and the world on the issue of exploitative and abusive labour practices.

A case of exploitation

• Origin of discounts in platform companies: An online search reveals the extent to which platform companies have been offering countless discounted offers during this festive season. But where do these discounts originate from?

• Source of Discounts: Gig workers want to make this clear — they come at the expense of their wages and are a result of near-slavery-like working conditions.
• Consumer and government responses: But do consumers or the government care about this?
  •  Instead, the manufactured narrative seems to be on how young people are finding employment through these “unicorn” startups.
  • Why are we not questioning how these startups achieve such rapid growth?
• Platform startups and venture capital: The truth is that the expansion of platform startups is being fuelled by the exploitation of platform-based gig workers and venture capital firms that are keen to supply money endlessly with no requirement of a sustainable profit model.

What was the controversial incident with a CEO?

• Readers must be aware of a controversial piece of conversation in October this year between the CEO of one of the largest platform companies and a stand-up comic and satirist.
• The satirist had highlighted deficiencies in the company’s products and services on social media and had challenged the CEO to take responsibility.
• But the satirist faced bullying instead.
• Prominent figures, which included a senior journalist, called the satirist a traitor while praising the CEO as a “nation’s wealth creator”.
• Key questions to ask: But is the CEO of this well-known platform really a wealth creator?
  • Or is he profiting from the exploitation of gig workers?
  • And how do we see the role of gig workers?
  • Why cannot we consider ‘labour exploitation’ to be an anti-national act?

Role of Gig workers in nation building

• It is a fact that informal economy workers contribute over 60% of India’s GDP.
• Women Gig Workers’ strike on Deepavali: women gig workers chose the auspicious day of Deepavali to initiate a digital strike, calling it a “Black Diwali”.
  • The response was overwhelming, with media coverage, and support from gig workers and citizen’s forums.
  • However, women workers are aware that this is a long battle as their demands are missing from mainstream labour discourse.
• Demands for better employment conditions: They advocate having secure and dignified employment and stricter regulations on platform companies.
  • Governments and larger gig worker organisations seem to focus only on minimal social security measures which are often just a little more than repackaged charity schemes than actual constitutional entitlements.
  • It is essential to remember that workers have fought for over a century for appropriate working hours, safe conditions, living wages, and secure employment norms.

One-sided ‘auto-assigned’ jobs

• Reinforcement of gendered roles: Digital platforms have perpetuated age-old patriarchal structures, limiting women to jobs that have been historically designated — beauticians, cooks, and housekeepers.
• Job security and ratings: Job security for women often hinges on ratings and the acceptance of “auto-assigned” jobs.
  •  If they refuse these exploitative norms, they face being blocked or, in effect, “illegally terminated.”
• Dystopian reality: This creates a dystopian reality wherein individuals are constantly rated and reduced to being mere numbers.
• Targeting Vulnerable Women: Many GIPSWU members are divorced, single mothers, or survivors of domestic violence, seeking refuge in platform jobs due to a lack of employment alternatives.
• Exploitation of Cheap Labour: Companies are aware and cash in on the fact that this is a pool of cheap labour that will remain available, making unionisation ineffective against their profit-driven models.
• Use of AI-Driven Algorithms: They exploit labour laws while employing incomprehensible Artificial Intelligence-driven algorithms to manage workers.

What have been issues related to the false promises of freedom and autonomy?

• Misleading promises: Under the guise of offering “freedom” to choose working hours and attain financial independence, gig economy platforms entice women with promises of balancing work and family commitments.
• Hidden pressures: Women often feel pressured to meet unrealistic targets while juggling the demands of gig work.
• Financial burdens: In return for a misleading sense of control over their schedules, they face heavy financial burdens, including transportation costs, necessary service products, and platform fees.
• Inequitable returns: This is a system that fails to provide equitable returns, leaving many without essential earnings or social security benefits.

What has been the state and systemic failures?

• Lack of Anti-Labour Protections: The state lacks systems to prevent companies from having anti-labour practices, and in the absence of data privacy laws, allows these platform giants to thrive.
• Feminisation of labour: The lack of regulation perpetuates a rudimentary feminisation of labour, hindering women workers in India from having basic human and labour rights.
• Patriarchal system: This deeply embedded patriarchal structure hinders women workers in India from having basic human and labour rights.
  •  It is a matter of shame that so many women are struggling when there are campaigns at the national level with slogans such as “Beti Bachao Beti Padhao”.
• Complex exploitation: Women have yet to escape the cycle of exploitation that many unicorn startups resort to in their claims to be fostering economic empowerment and addressing India’s unemployment crisis.
• Digital patriarchy: The reality is that women have fallen into a more complex cycle of exploitation — one where conventional patriarchy merges with digital patriarchy, leading to profound economic exploitation.

Conclusion: Grassroot power

GIPSWU must pursue a long-term agenda with a nuanced strategy. This digital strike has bolstered worker confidence and has shown pathways that will lead to victories. The writers have been told that no such assertion of dissent has been seen anywhere else in the world before and that it is a proud moment. There is no substitute for grass-roots organising, and we understand its power. It is only which can help us conduct negotiations for suitable policies and laws in the future. Gig workers around the world are watching, and we will not let them down.