2 August 2024 : The Hindu Editorial Analysis

1. A verdict on the Money Bill that India awaits

(Source – The Hindu, International Edition – Page No. – 8)

Topic: GS2 – Indian Polity – Judiciary,  Constitutional Provisions

Context

A seven-judge Bench of the Supreme Court of India will examine the definition of a Money Bill, affecting recent legislation passed without Rajya Sabha approval. This decision will impact India’s federal structure and the constitutional balance of power, focusing on the controversial Finance Act, 2017, and related cases.

Context and Background

• A seven-judge Bench of the Supreme Court of India is set to hear arguments on the definition and scope of a Money Bill.
• The decision will impact various legislation passed without the Rajya Sabha’s approval, affecting India’s federal structure and the constitutional division of powers.

Origin of the Reference

• The reference to the seven-judge Bench arises from the 2019 Supreme Court case Rojer Mathew vs. South Indian Bank Ltd., which challenged the Finance Act, 2017.
• The Finance Act, passed as a Money Bill, altered the authority and jurisdiction of 26 tribunals, raising questions about its classification as a Money Bill.

Constitutional Provisions

• Under Article 109, a Bill in India requires approval from both Houses of Parliament to become law. However, a Money Bill can be enacted with only the Lok Sabha’s approval.
• Article 110(1) defines a Money Bill, listing specific subjects it must exclusively deal with, including taxes, borrowing of money, and matters related to the Consolidated Fund of India.
• Article 110(3) gives the Lok Sabha Speaker the final authority to determine whether a Bill is a Money Bill.

The Issue with the Finance Act, 2017

• The Finance Act, 2017, incorporated provisions beyond those allowed under Article 110(1), such as tribunal reorganisation and delegation of powers to the executive.
• The legislation also included substantive amendments to laws affecting the judiciary’s independence, which were not merely incidental to the provisions of a Money Bill.

The Court’s Challenge in Rojer Mathew

• The Supreme Court in Rojer Mathew found the Finance Act, 2017, to be a misuse of power, but the majority felt constrained by precedents.
• The case referenced K.S. Puttaswamy vs. Union of India (2018), where the Aadhaar Act was upheld as a Money Bill, despite including numerous provisions unrelated to financial matters.

The Role of the Word “Only”

• The interpretation of the word “only” in Article 110(1) is crucial, as it implies that a Money Bill must deal solely with the subjects listed in the article.
• The seven-judge Bench must now address this interpretation, which will have significant consequences for future legislation and the bypassing of the Rajya Sabha.

Recent Precedents and Implications

• Other instances, like the Finance Act, 2019, also bypassed the Rajya Sabha using the Money Bill route. It included major amendments to the Prevention of Money Laundering Act, 2002.
• The Supreme Court, in Vijay Madanlal Choudhary vs. Union of India (2022), upheld many of these amendments but left open the question of their validity as a Money Bill.

The Importance of the Rajya Sabha

• Justice D.Y. Chandrachud emphasised the critical role of the Rajya Sabha in reflecting India’s pluralism and acting as a federal check on legislation.
• The practice of bypassing the Rajya Sabha via Money Bills undermines its constitutional role and threatens the federal balance.

Conclusion:

• The misuse of Money Bills to circumvent the Rajya Sabha could endanger India’s democratic foundations.
• The Supreme Court’s ruling will determine whether the current practices will continue, impacting both legislative processes and the federal structure.

PYQ: Q1. Regarding the Money Bill, which of the following statements is not correct? (UPSC civil services prelims 2018) (a) A bill shall be deemed to be a Money Bill if it contains only provisions relating to the imposition, abolition, remission, alteration or regulation of any tax. (b) A Money Bill has provisions for the custody of the Consolidated Fund of India or the Contingency Fund of India. (c) A Money Bill is concerned with the appropriation of money out of the Contingency Fund of India. (d) A Money Bill deals with the regulation of borrowing of money or giving of any guarantee by the Government of India. Ans: Option C

Practice Question:  Discuss the constitutional implications of the Supreme Court’s review of the definition of a Money Bill. How does this impact the balance of power between the Lok Sabha and the Rajya Sabha, and what are the potential consequences for India’s federal structure? (250 Words /15 marks)

2. Propelling the U.K. and India story

(Source – The Hindu, International Edition – Page No. – 8)

Topic: GS2 – International Relations – Bilateral Relations

Context

Recent elections in India and the U.K. have set the stage for a strengthened U.K.-India partnership. With new leadership committed to enhancing ties, priorities include concluding a Free Trade Agreement, boosting economic collaboration, and exploring opportunities in technology, R&D, defence, education, and climate change initiatives.

Introduction

• Recent elections in India and the United Kingdom (U.K.) mark a new chapter in the U.K.-India partnership.
• Prime Minister Narendra Modi won a third consecutive term, and the Labour Party, led by Sir Keir Starmer, achieved a landslide victory in the U.K.

Strengthening the U.K.-India Partnership

• The Labour Party is committed to a “new strategic partnership” with India, focusing on a swift conclusion of the U.K.-India Free Trade Agreement (FTA).
• Areas of cooperation include security, technology, climate change, and education.
• The U.K.’s Secretary of State for Foreign, Commonwealth and Development Affairs, David Lammy, visited India shortly after taking office.

Economic Achievements and Future Goals

• The ‘2030 Roadmap’ has successfully boosted bilateral trade to £39 billion in 2023.
• Both countries employ around 800,000 people in each other’s economies.
• A call for a new Roadmap to 2047 aims to maximise the partnership’s potential.

India’s Global Significance

• India’s global influence is evident through its G-20 Presidency, moon landing, digital infrastructure, and economic growth.
• The U.K. India Business Council encourages understanding of India’s strategic partnership opportunities.
• India is integral to the U.K.’s research and development, technology, talent, and supply chains.

Prioritising a Swift FTA

• The U.K. government is urged to prioritise India for an equal economic partnership.
• A swift FTA is considered foundational for technology and research and development collaboration.
• India offers the best return on investment per dollar of R&D spending.

Opportunities for Collaboration

• Indian firms are keen to collaborate with U.K. companies and universities.
• Existing healthcare partnerships can expand to include clinical trials, research sharing, and knowledge transfer.
• U.K. investments in sustainability technology and climate financing support India’s green initiatives.
• Transnational Education routes can provide world-class higher education in India.

Defence and Security Collaboration

• The U.K. and India are natural partners in defence and security.
• Historically a major defence supplier to India, the U.K. now holds a 2.5% market share.
• India focuses on indigenization, reliable supply chains, critical technology access, export increase, and domestic job creation.
• India’s Defence Minister Rajnath Singh’s visit to the U.K. signifies rising momentum in defence collaboration.

Mobility and People-to-People Ties

• Mobility for students and skilled professionals is crucial for trust and confidence.
• The U.K. has issued about 350,000 visas to Indian nationals in the last year for work, education, or as dependents.
• Promoting this “living bridge” strengthens U.K.-India ties and welcomes Indian investors.

Unlocking the Partnership’s Full Potential

• The vast potential for a deeper U.K.-India economic partnership requires mutual effort.
• Further business environment reforms in India are encouraged to attract British investment.
• British companies support manufacturing in India and seek policies that integrate India into supply chains efficiently.

Policy and Regulatory Recommendations

• Facilitating tariffs and standards would unlock significant investment inflows.
• Fair taxation policies and regulatory treatment should ensure parity for all investors.
• Adequate protection and compensation for new Intellectual Property (IP) developed in India are essential.
• Streamlining approvals and ensuring consistency across government departments and regulators are crucial for ease of doing business.

Conclusion

• Collaboration between the U.K. and India can enhance the global economic partnership.
• India’s economic rise is an exciting opportunity for shared prosperity.
• Prime Minister Modi’s statement highlights the mutual benefits of deepening friendships with India, setting the tone for a prosperous future.

Practice Question:  Analyse the potential impacts of the recent electoral outcomes in India and the United Kingdom on the bilateral relationship between the two countries, focusing on economic, technological, and strategic partnerships. (250 Words /15 marks)

3. Is the Centre being iniquitous in State transfers?

(Source – The Hindu, International Edition – Page No. – 9)

Topic: GS2 – Indian Polity – Federal Structure

Context

Opposition Chief Ministers boycotted the NITI Aayog meeting, accusing the Centre of bias in resource allocation, particularly against non-NDA states The discussion highlights issues in discretionary grants, the role of NITI Aayog versus the Planning Commission, and concerns over cesses and surcharges affecting fiscal federalism and state finances.

Allegations of Bias in Resource Allocation:

• The Union Budget has faced criticism from Opposition Chief Ministers, who allege discrimination against non-NDA States, leading to boycotts and walkouts from NITI Aayog meetings.
• Biases in resource allocation have been a point of contention, with the Union Budget no longer being a major tool for allocating resources to states, due to the shift away from public sector scheme-based allocations post-economic liberalisation.
• Critics argue that discretionary grants from the Centre to states lack clear criteria, leading to perceived arbitrariness and a lack of transparency in resource allocation.

Issues with NITI Aayog and Planning Commission:

• The Planning Commission’s abolition aimed to provide states with more flexibility through increased devolution of funds and reduced central control over state planning.
• Critics argue that NITI Aayog, which replaced the Planning Commission, lacks financial powers and is primarily a think tank, unable to serve as an effective intermediary between the Centre and States.
• There is a call for a new, credible body that can facilitate discussions between the Centre and states, ensuring transparency and fairness in resource distribution.

Tax Devolution and Regional Inequality:

• The debate on tax resource distribution involves whether states that contribute more should receive a larger share or whether distribution should aim for equitable service provision across the country.
• Using tax collection location as a basis for devolution could exacerbate regional inequalities, as major taxes are collected in few business hubs.
• Grants should address state-specific needs and fiscal challenges, with states articulating their requirements to the Finance Commission.

Cesses, Surcharges, and Fiscal Federalism:

• Cesses and surcharges have increased over time, remaining outside the divisible pool and often not shared with states.
• While cesses are constitutionally allowed, their prolonged and widespread use raises concerns about their impact on fiscal federalism and state resources.
• Critics suggest increasing the state’s share in the divisible pool to compensate for the Centre’s retention of cess and surcharge revenues.

Kerala’s Fiscal Challenges and Revenue Deficit Grants:

• Kerala’s Finance Minister has highlighted challenges such as reduced revenue deficit grants, borrowing limits, and decreased state shares in the divisible pool.
• Kerala’s fiscal constraints arise from historical investments in social sectors, necessitating revenue deficit grants to support its developmental model.
• Other states, perceived as fiscally prudent, may have lower social sector investments, achieving budgetary stability at a social cost.
• The continuation of revenue deficit grants is essential to compensate states like Kerala for their social sector investments and ensure fiscal equity.

Call for Reforms and Cooperative Federalism:

• There is a demand for reforms to ensure equitable resource distribution and transparent decision-making in intergovernmental fiscal relations.
• Cooperative fiscal federalism should be strengthened by establishing clear guidelines for discretionary grants and enhancing the role of state consultations in decision-making.
• Ensuring rule-based transfers and reducing the Centre’s discretion in resource allocation are vital for fostering trust and collaboration between the Centre and States.

Conclusion:

• The debate on state transfers highlights the need for a balanced approach to fiscal federalism, addressing regional disparities while ensuring states have the resources to meet their developmental needs.
• The role of bodies like NITI Aayog and the Finance Commission is crucial in mediating these issues and promoting equitable growth across the country.
• Reforming the mechanisms of resource allocation and fostering genuine cooperative federalism can lead to more harmonious Centre-State relations and better outcomes for all regions.

PYQ: The concept of cooperative federalism has been increasingly emphasised in recent years. Highlight the drawbacks in the existing structure and the extent to which cooperative federalism would answer the shortcomings. (200 words/12.5m) (UPSC CSE (M) GS-2 2015)

Practice Question:  Discuss the implications of discretionary grants and cesses on fiscal federalism in India, with reference to recent criticisms by Opposition Chief Ministers regarding resource allocation. (250 Words /15 marks)