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24 May 2024 : Indian Express Editorial Analysis

1. Model code and context

Topic: GS2 – Polity – Constitutional Bodies
Context:
  • The article discusses the importance of truth in the context of India’s national motto, “Satyameva Jayate,” and its relevance to the functioning of the Election Commission of India (ECI).
  • It explores the philosophical complexity of truth and the ethical challenges faced by the ECI in ensuring fair elections through the Model Code of Conduct (MCC).
  • By examining the nuanced differences between legal and moral codes, the article highlights the difficulties in maintaining ethical political behavior and calls for a renewed commitment to integrity in the democratic process.

The Concept of Truth:

  • The article delves into the philosophical inquiry of truth, invoking Francis Bacon’s essay “Of Truth.”
  • It suggests that truth is complex and multifaceted. The Ashokan pillar’s emblem, with its four lions, metaphorically represents different perspectives of truth:
    • one that is visible to the speaker,
    • another to the listener,
    • a third to an observer, and
    • a fourth dimension that remains unfathomable, often referred to as known only to God.

The Model Code of Conduct (MCC):

  • The ECI enforces the Model Code of Conduct (MCC) during elections, aiming to ensure candidates and political parties adhere to ethical standards.
  • The article discusses the inherent challenge in expecting individuals to exhibit model behavior during campaigns if they do not practice it in their daily lives.
  • The MCC’s adoption came with the hope of instilling self-restraint among political stakeholders.
  • The ECI’s 2019 Manual on MCC emphasized that aspiring representatives should demonstrate exemplary behavior.

Political Discourse and Language:

  • The article addresses the degradation of political discourse, where some political leaders’ coarse language reflects their intentions.
  • It contrasts a “model” code with a “moral” code, explaining that morality is subjective and deeper than legal guilt.
  • Citing Immanuel Kant, it differentiates between legal guilt based on actions and ethical guilt based on thoughts.

Legal and Ethical Challenges:

  • The MCC prohibits activities that exacerbate communal tensions or appeal to caste or community for votes, considering such actions as corrupt practices under the Indian Penal Code and the Representation of the People Act, 1951.
  • However, proving these violations requires explicit connections to election activities, creating loopholes for political actors to exploit through ambiguous language.

The Mahabharata Analogy:

  • The article draws a parallel with the Mahabharata, recounting how Yudhishthira’s half-truth about Ashwathama’s death led to unintended consequences.
  • This analogy illustrates the complexity of truth and its impact on morality and ethics, suggesting that electoral integrity requires both a robust MCC and a conscientious approach from all participants.

Conclusion:

  • The article calls for a re-evaluation of the MCC and a collective reboot of societal conscience.
  • It stresses that while elections are crucial for democracy, they should not compromise the moral foundation of society, as such damage could have long-lasting effects beyond the electoral process.
What are the Issues Associated with MCC?
  • Enforcement Challenges: Enforcement of the MCC can be inconsistent or inadequate, leading to violations that may go unpunished due to lack of statutory backing. The ECI opposes the legalisation of the MCC, citing the need for swift completion of elections within approximately 45 days, making legal enforcement impractical due to lengthy judicial processes.
  • Ambiguity: Certain provisions of the MCC may be vague or open to interpretation, leading to confusion among political parties and candidates.
  • Limited Scope: Critics argue that the MCC’s scope should be expanded to cover a wider range of issues, including electoral funding, social media usage, and hate speech.
  • Timing Issues: The MCC comes into effect only during election periods, leaving room for misconduct outside of these periods.
  • Impact on Governance: Some argue that the MCC’s restrictions on government announcements and activities during election periods may hinder the functioning of governance.
  • Need for Reform: There are calls for reforming the MCC to address its shortcomings and make it more effective in ensuring fair and transparent elections.
PYQ: Discuss the role of the Election Commission of India in the light of the evolution of the Model Code of Conduct.  (UPSC CSE (M) GS-2 2022)
Practice Question:  Discuss the significance of ‘Satyameva Jayate’ in the context of the Election Commission of India’s mandate. How does the Model Code of Conduct (MCC) reflect the ethical challenges of ensuring fair elections, and what measures can be taken to strengthen the integrity of the electoral process in India? (250 words/15 m)

 

2. A WINDFALL GAIN

Topic: GS3 – Indian Economy
Context:
  • The central board of the Reserve Bank of India (RBI) approved the transfer of Rs 2.1 lakh crore as surplus to the central government.
  • This transfer is significantly higher than the Rs 1.02 lakh crore estimated in the interim Union budget for 2024-25.
  • Alongside this, the central board has increased the contingency risk buffer to 6.5% of the RBI’s balance sheet for 2023-24, up from 6% in 2022-23.
  • This buffer is maintained for financial stability crises, reflecting the RBI’s role as the lender of last resort.

Everything You Need To Know AboutBasis for Surplus and Buffer Determination:

  • The surplus and contingency buffer have been determined based on the economic capital framework recommended by an expert committee headed by former RBI Governor Bimal Jalan.
  • The unexpectedly high transfer likely results from increased interest income from the RBI’s foreign and domestic assets and forex transactions.

Implications for Fiscal Policy:

Creation of Fiscal Space

The higher than expected surplus transfer creates considerable fiscal space for the next government, equating to around 0.4% of GDP. This can be utilized in several ways:

  • Reducing Fiscal Deficit: The government could bring about a steeper decline in the fiscal deficit than previously outlined. The interim budget aimed to reduce the deficit from 5.8% of GDP in 2023-24 to 5.1% in 2024-25.
  • Offsetting Revenue Shortfalls: The surplus could help offset potential revenue shortfalls in areas such as disinvestment.
  • Increasing Capital Expenditure: The government might increase the allocation for capital expenditure from the budgeted Rs 11.1 lakh crore (3.4% of GDP).

Impact on Markets

  • The immediate impact of the surplus transfer is evident in the financial markets, with the 10-year bond yield falling.

Commitment to Fiscal Consolidation:

  • In the Union budget for 2021-22, the government announced a fiscal deficit of 9.5% of GDP for 2020-21 and committed to reducing it to below 4.5% by 2025-26.
  • Subsequent budgets have reaffirmed this commitment, with a steady increase in the allocation for capital expenditure.
  • The center’s capex to GDP ratio has risen from 2.5% in 2021-22 to 3.23% in 2023-24, and further to 3.4% in the 2024-25 interim budget, enhancing the quality of spending.
  • It is crucial for the next government to continue this path of fiscal consolidation and capital expenditure investment.
Bimal Jalan Committee Recommendations
Formation:

  • The RBI in 2018 constituted a six-member committee, chaired by former governor Dr Bimal Jalan, to review the current economic capital framework (ECF), after the Ministry of Finance asked the central bank to follow global practices.

Recommendations:

  • The panel proposed a clear separation of RBI’s economic capital into two parts: Realised equity and Revaluation balances.
  • Revaluation reserves include unrealised gains/losses in foreign currencies, gold, securities, and a contingency fund.
  • Realised equity, or CRB, is funded by retained earnings to cover risks and losses.
  • The committee suggested that the RBI should maintain a CRB within the range of 6.5% to 5.5% of the RBI’s balance sheet.
  • ·      This would provide an adequate buffer against market risks, credit risks, and operational risks.
  • The committee recommended that the RBI should transfer its surplus funds to the government only after maintaining the CRB within the suggested range.
  • This would ensure that the RBI’s financial resilience is not compromised while supporting the government’s fiscal needs.
  • The panel also suggested that the RBI’s ECF should be reviewed every five years.

Note:

  • The RBI Board’s technical Committee, led by Y H Malegam in 2013, recommended a higher transfer of reserves and surplus to the government, which typically averages around 0.5% of the Gross Domestic Product (GDP) with a few exceptions.
PYQ: Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (2017)

1) It decides the RBI’s benchmark interest rates.

2) It is a 12-member body including the Governor of RBI and is reconstituted every year.

3) It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 3 only

(d) 2 and 3 only

Ans: a

Practice Question:  Evaluate the implications of the Reserve Bank of India’s surplus transfer to the central government. How can the increased fiscal space be strategically utilized to balance between reducing the fiscal deficit and enhancing capital expenditure? (250 words/15 m)

 

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