13 Mar 2021: Indian Express Editorial Analysis

Indian Express Editorial Analysis
13 March 2021

1. Reading the law that maintains status quo in places of worship
GS 2: Government Policies & Interventions
Judiciary

CONTEXT:

1. Recently, the Supreme Court asked the Centre to respond to a plea challenging the Places of Worship (Special Provisions) Act, 1991.

2. In agreeing to examine the law, the court has opened the doors for litigation in various places of worship across the country including Mathura and Varanasi.

What is the law about?

1. Passed in 1991 by the P V Narasimha Rao-led Congress government, the law seeks to maintain the “religious character” of places of worship as it was in 1947 — except in the case of Ram Janmabhoomi-Babri Masjid dispute, which was already in court.

2. The law was brought in at the peak of the Ram Mandir movement, exactly a year before the demolition of the Babri Masjid.

3. Introducing the law, then Home Minister S B Chavan said in Parliament that it was adopted to curb communal tension.

What are its provisions?

1. The clause declaring the objective of the law describes it as “an Act to prohibit conversion of any place of worship and to provide for the maintenance of the religious character of any place of worship as it existed on the 15th day of August, 1947, and for matters connected therewith or incidental thereto”.

2. Sections 3 and 4 of the Act declare that the religious character of a place of worship shall continue to be the same as it was on August 15, 1947 and that no person shall convert any place of worship of any religious denomination into one of a different denomination or section.

3. Section 4(2) says that all suits, appeals or other proceedings regarding converting the character of a place of worship, that were pending on August 15, 1947, will stand abated when the Act commences and no fresh proceedings can be filed.

4. However, legal proceedings can be initiated with respect to the conversion of the religious character of any place of worship after the commencement of the Act if the change of status took place after the cut-off date of August 15, 1947.

What does it say about Ayodhya, and what else is exempted?

1. Section 5 says: “Act not to apply to Ram Janma Bhumi Babri Masjid. Nothing contained in this Act shall apply to the place or place of worship commonly known as Ram Janma Bhumi-Babri Masjid situated in Ayodhya in the State of Uttar Pradesh and to any suit, appeal or other proceeding relating to the said place or place of worship.”

2. Besides the Ayodhya dispute, the Act also exempted:

  • Any place of worship that is an ancient and historical monument or an archaeological site, or is covered by the Ancient Monuments and Archaeological Sites and Remains Act, 1958;

  • A suit that has been finally settled or disposed of;

  • Any dispute that has been settled by the parties or conversion of any place that took place by acquiescence before the Act commenced.

What has the Supreme Court said about the Act?

1. In the 2019 Ayodhya verdict, the Constitution Bench led by former Chief Justice of India Ranjan Gogoi referred to the law and said it manifests the secular values of the Constitution and strictly prohibits retrogression.

2. “In providing a guarantee for the preservation of the religious character of places of public worship as they existed on 15 August 1947 and against the conversion of places of public worship, Parliament determined that independence from colonial rule furnishes a constitutional basis for healing the injustices of the past by providing the confidence to every religious community that their places of worship will be preserved and that their character will not be altered.

3. The law addresses itself to the State as much as to every citizen of the nation. Its norms bind those who govern the affairs of the nation at every level. Those norms implement the Fundamental Duties under Article 51A and are hence positive mandates to every citizen as well.

4. The State, has by enacting the law, enforced a constitutional commitment and operationalized its constitutional obligations to uphold the equality of all religions and secularism which is a part of the basic structure of the Constitution,” the court said.

 

Why is the law under challenge?

 

1. Cut-off date of August 15, 1947 is “arbitrary, irrational and retrospective” and prohibits Hindus, Jains, Buddhists, and Sikhs from approaching courts to “re-claim” their places of worship which were “invaded” and “encroached” upon by “fundamentalist barbaric invaders”.

2. The Rightists had opposed the law even when it was introduced, arguing that the Centre has no power to legislate on “pilgrimages” or “burial grounds” which is under the state list.

3. However, the government had said it could make use of its residuary power under Entry 97 of the Union List to enact this law. Entry 97 confers residuary powers to the Centre to legislate on subjects that are not enumerated in any of the three lists.

4. Another criticism against the law is that the cut-off is the date of Independence, which means that status quo determined by a colonial power is considered final.

 

2. States of distress

With revenues falling, states have curtailed capital expenditure. But economy requires more spending support.

GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth

CONTEXT:

  1. The COVID-19 pandemic has wreaked havoc not only on central government finances, but on state government finances as well.

  2. With economic activity slowing down sharply, the consequent fall in their own revenues, as well as transfers from the Centre, has led to states not only curtailing their expenditure, but also having to borrow more to finance their spending.

ABOUT:

  1. As a consequence, the average fiscal deficit of 13 states has risen to 4.5 per cent of gross state domestic product (GSDP) in the revised estimates for 2020-21, up from the budgeted estimate of 2.8 per cent according to a report from SBI.

  2. Next year, in line with the fiscal consolidation path adopted by the Centre, states too have projected to bring down their deficits to 3.3 per cent of GSDP.

  3. The extent of the revenue hit that these states have faced in the current financial year is staggering. As against a budgeted goods and services tax (GST) target of Rs 5.86 lakh crore in 2020-21, collections have fallen by 21.2 per cent to Rs 4.62 lakh crore.

  4. In states like Kerala and Uttar Pradesh, the report shows, revenue loss is in excess of 30 per cent. A similar decline is observed in state VAT (value added tax) and sales tax collections.

  5. While this is mainly levied on crude oil products, and thus collections should have benefited due to an increase in taxes levied, the decline in demand has been far greater.

  6. Collections for these 13 states through this route have fallen by 14.7 per cent from budgeted expectations of Rs 2.62 lakh crore to Rs 2.23 lakh crore in 2020-21.

WHAT TO DO?

  1. States have had to curtail their spending. But several states, including Bihar, Chhattisgarh, Karnataka, Odisha and West Bengal, have spent more than what they had budgeted for on health and family welfare during this year.

  2. For the next year, too, most of these states have projected sharp increases in spending in these areas.

  3. Considering that healthcare is primarily the domain of the states, this increase in spending during a health emergency was much needed.

  4. It is disappointing that in several states, spending on health has actually fallen during this period. Equally disconcerting is the sharp cut backs on capital expenditure by states during this year.

  5. At a time when private consumption and investment demand are subdued, higher government spending, both at the central and state level, is needed to offset the decline.

  6. Given the extent of the economic distress, especially in the informal parts of the economy, far greater policy support is needed.

Way ahead:

  1. The current crisis is so terrible in its toll of life and livelihoods that the need of the hour must be minimising the health, humanitarian and economic costs, especially for the most vulnerable.

  2. Rising public expenditures to help tens of millions of workers and their families alongside plummeting resources will inevitably force hard choices.

  3. Appropriately, much of the policy discussion and the government’s first response have focussed on addressing the immediate imperatives.

  4. The Centre should immediately announce that even the states will be allowed to exceed their fiscal responsibility legislation targets because they will be in the front line of taking action against the pandemic.

Conclusion

  1. These examples illustrate how the crisis can be converted to an opportunity to fundamentally strengthen the Indian economy, and protect the vulnerable.

  2. A common thread to many of these actions — indeed prerequisites for their success — is cooperation between the Centre and states. Central direction combined with flexibility and nimbleness in the states and local bodies is India’s way through the crisis and beyond.

 

3. Needed: National security shield in FDI

As India’s experience with Chinese FDI during Covid shows, a law is essential to identify security threats from foreign investment

GS 3: Investment Models

Liberalization

CONTEXT:

  1. India may partially relax its position on foreign direct investments (FDI) from China. Last April, India had subjected all Chinese FDI to mandatory government screening.

  2. The aim was to curb opportunistic takeovers of Indian companies, a concern fuelled by sharp corrections in equity markets in March 2020.

  3. With market indices now hovering at their peaks, reportedly India may allow Chinese FDI up to 25 per cent in equity under the automatic route. This could offer immediate relief to many investors and entrepreneurs alike.

 

 

OTHER EXAMPLES:

  1. This episode holds a deeper policy lesson. India’s concerns about opportunistic takeovers were not unique.

  2. Several economies including the US, Australia, Canada and Germany faced similar concerns. They blocked specific takeover attempts, using special laws for national security screening of inward FDI.

  3. In the absence of similar legislation, India did not differentiate between investments which raised genuine national security concerns and those that did not. This is a crucial shortcoming.

FDI ROUTE IN INDIA:

  1. FDI is allowed under two modes - either through the automatic route, for which companies don't need government approval, or through the government route, for which companies need a go-ahead from the centre.

  2. India regulates foreign investments primarily through FEMA. The preamble to FEMA clearly provides two specific macro-prudential objectives — facilitating external trade and payments; and promoting orderly development and maintenance of foreign exchange markets in India.

  3. Accordingly, it empowers the central government and the RBI, acting in consultation with each other, to regulate capital account transactions. These regulations determine who can invest through the FDI route, in which sector and how much.

THREATS FOM FOREIGN ACQUISITIONS:

  1. The first threat arises if a foreign acquisition renders India dependent on a foreign-controlled supplier of goods or services crucial to the functioning of the Indian economy.

  2. For this threat to be credible, it is not enough that the goods or services supplied by the target company are “crucial” to India.

  3. It needs to be further established that the industry in which the acquisition is supposed to take place is tightly concentrated, the number of close substitutes limited, and the switching costs are high.

  4. Only if these conditions exist, could there be a credible security threat to India arising from dependency on a foreign-controlled supplier.

  5. The second threat emanates from a proposed acquisition transferring a technology or an expertise to a foreign-controlled entity that might be deployed by that entity or a foreign government in a manner harmful to India’s national interests.

  6. The credibility of this threat again depends on whether the market for such technology or expertise is tightly concentrated or if they are readily available elsewhere.

  7. The third threat arises if a proposed acquisition allows insertion of some potential capability for infiltration, surveillance or sabotage via human or non-human agents into the provision of goods or services crucial to the functioning of Indian economy.

  8. This threat is particularly credible when the target company supplies crucial goods or services to the Indian government, its military or even critical infrastructure units and the switching costs are high.

ISSUES AND WHAT TO DO?

  1. FEMA regulations have often responded to concerns not strictly related to macro-prudential objectives.

  2. One such concern has been national security. While such applications of FEMA may have served their purpose during crises, it is time India emulates its western peers and enacts a statute specifically designed for national security screening of strategic FDI.

  3. Unlike FEMA, this new statute must explicitly lay down legal principles for determining when a foreign acquisition of an Indian company poses genuine national security threats.

  4. When competition among rival suppliers is high and switching costs are low, there is no genuine security justification for blocking a proposed foreign acquisition no matter how crucial the goods and services the target domestic company supplies. Such conceptual clarity in the new statute could make national security assessments objective, transparent and amenable to the rule of law.

  5. On procedure, the statute must empower only the finance minister to reject certain strategic foreign acquisitions on national security grounds. Both the power and accountability mechanisms should be hardcoded into the statute itself, as is the case in some mature parliamentary democracies.

CONCLUSION:

  1. Overall, India’s tryst with Chinese FDI underscores the importance of identifying specific national security threats emanating from strategic FDI and addressing them objectively.

  2. This is too sensitive a matter to be left to capital controls under FEMA. A dedicated statute for national security screening of inward FDI would be best suited for handling such issues.